The primary focus of Welam's comment [Welam, Ulf Peter. 1977. On a simultaneous decision model for marketing, production and finance. Management Sci. 23 (9, May) 1005–1009.] is the criticism of the specific form of the demand function used to Damon and Schramm [Damon, William W., Richard Schramm. 1972. A simultaneous decision model for production, marketing and finance. Management Sci. 19 (October) 161–172, (13)]. His criterion for evaluating the model appears to be the degree to which individual equations faithfully represent the modelled phenomena for all possible values of the endogenous variables. This test of model validity would reject the quadratic approximations of production costs in the Holt, Modigliani, Muth and Simon study [Holt, Charles C. et al. 1960. Planning Production, Inventories, and Work Force. Prentice-Hall, Inc., Englewood Cliffs.], and would reject the use of quadratic utility functions, since at some level of income or wealth marginal utility becomes negative.

The Holt, Modigliani, Muth, and Simon production scheduling model is extended to incorporate variables reflecting marketing and working capital management in a cash flow formulation. A constrained nonlinear program is dervied for which a local optimal solution is discovered employing the SUMT program. Reasonable values are are assigned to the parameters and the relative profitability of such a simultaneous formulation, compared to a sequential model, is tested. Initial results demonstrate an improvement of 25% by solving for the optimal values of the functional decision variables simultaneously.