DECDO Homes is developing a housing community at a privately owned island in the Spraty islands. The primary market for the i community and homes includes all midde and upper-income families within approimately 1000 klometers from Palaan. DECDO Homes employed the advertising fim of CBA Company to design the promotional campaign Aher considering possible advertising media and the market to be covered CBA recommended that the first months advertising be restricted to five media Ahe end of the month DECOO ill then reevaluate is stategy based on the monthis resus. CBA collected data on the number of potential customers reached the cost per advertisement, the maimum number of times each mediumis avalable, and the oposure quality ating for each of the fve media. The quality rating is measured in terms of an eposure quality unit ameasure of the relative value of one advertisement in each media. This measure, based on CBAS eoperience in the advertising business, considers tactors such as audience demographics age income and education of the audience reached image presented, an quality of the advertisement. The information colected is presented in folowing table Maimum Time the Expore pete men ement Cet per ting Meda Qulity ilale per ched betime Tmi 5000 15 1000 bening T d 2000 paly newpaper magacine 4000 25 2500 pe ed ada lepund Radio 00m or Spmews 0 300 1000 DECOO provided CBA with an advertising budget of P300000 for the first monthis campaign in addition DECOO imposed the follow restrictions on how CBAmay alocate these funds At least 10 television commercials must be used, at least S000 potential customers must be reached and no more than Pa0,000 may be spent on television advertisements Athe optimal solution, the number of Radio ad constraint has ashadow price of 14 What does it mean
DECDO Homes is developing a housing community at a privately owned island in the Spraty islands. The primary market for the i community and homes includes all midde and upper-income families within approimately 1000 klometers from Palaan. DECDO Homes employed the advertising fim of CBA Company to design the promotional campaign Aher considering possible advertising media and the market to be covered CBA recommended that the first months advertising be restricted to five media Ahe end of the month DECOO ill then reevaluate is stategy based on the monthis resus. CBA collected data on the number of potential customers reached the cost per advertisement, the maimum number of times each mediumis avalable, and the oposure quality ating for each of the fve media. The quality rating is measured in terms of an eposure quality unit ameasure of the relative value of one advertisement in each media. This measure, based on CBAS eoperience in the advertising business, considers tactors such as audience demographics age income and education of the audience reached image presented, an quality of the advertisement. The information colected is presented in folowing table Maimum Time the Expore pete men ement Cet per ting Meda Qulity ilale per ched betime Tmi 5000 15 1000 bening T d 2000 paly newpaper magacine 4000 25 2500 pe ed ada lepund Radio 00m or Spmews 0 300 1000 DECOO provided CBA with an advertising budget of P300000 for the first monthis campaign in addition DECOO imposed the follow restrictions on how CBAmay alocate these funds At least 10 television commercials must be used, at least S000 potential customers must be reached and no more than Pa0,000 may be spent on television advertisements Athe optimal solution, the number of Radio ad constraint has ashadow price of 14 What does it mean
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:DECOO Homes is developing a housing communrity at a privately owned island in the Spratly islands. The primary market for the island
community and homes includes all midde- and upper-income families within approsimately 1000 klometers from Palawan. DECOO
Homes employed the advertising firm of CBA Company to design the promotional campaign.
Ater considering possible advertising media and the market to be covered CBA recommended that the first month's advertising be
restricted to five media. At the end of the month DECOO wil then reevaluate its s
strategy based on the month's results. CBA colleted
data on the number of potential customers reached, the cost per advertisement, the maximum number of times each medium is
avalable, and the exposure quality rating for each of the five media. The quality rating is measured in terms of an exposure quality unit,
a measure of the relative value of one advertisement in each media. This measure, based on CBA's experience in the advertising
business, considers factors such as audience demographics (age, income, and education of the audience reachedi, image presented, and
quality of the advertisement. The information collected is presented in following table.
Maximum
Ne. of
Times the Exposure
petential
Cest per
Advertialng Media
medium i
Quality
customers advertsement
vailable per
unit
reached
month
Daytime TV (1 min
ening TV (10 sed
L000
15.000
15
2.000
0.000
10
90
baly newpaper magacine
500
4000
25
40
Snday newspaper magazine (2 page ouloren
2500
10.000
60
Radio. 00am or Spm news 0 sed
200
1000
30
20
DECOO provided CBA with an advertising budget of P3000 for the first month's campaign In addition, DECO0 imposed the following
restrictions on how CBA may allocate these funds: At least 10 television commercials must be used, at least 50,000 potential customers
must be reached, and no more than P180,000 may be spent on television advertisements.
Al the optimal solution, the number of Radio ads" constraint has a shadow price of 14. What does it mean?
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