RED BRAND CANNERS

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ITDM; a ppt by stalwarts of PGDM (12-14 batch) of Era Business School, New Delhi

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RED BRAND CANNERS

  1. 1. Faculty: Prof J Jha
  2. 2. Three types of tomato products.  Whole canned tomato  Tomato Juice  Tomato Paste Total Quantity (already contracted/purchased) Cost per lb* in US ¢ (1 lb = 453.592 gms) Total Cost in US $ ( 1 $ = 100¢) *Libra Pondo (lb) (Latin) 3M Lbs 06 1,80,000
  3. 3. Types of tomato Quantity (in M lbs) Quality (in points) Quality points acceptable for products Grade A 0.6 9 Whole Canned - 8 Grade B 2.4 5 Juice - 6
  4. 4. Variables Particulars AW A grade/whole canned BW B grade/whole canned AJ SP per case (in $)/ lbs per case Contribution per lb (in $) 4.0/18 (1.48/18) = 0.0822 4.5/20 (1.32/20) = 0.066 3.80/25 (1.85/25) = 0.074 A grade/juice BJ B grade/juice AP A grade/paste BP B grade/paste Since the fruit has already been contracted, The cost of fruit per pack is taken as a Sunk Cost
  5. 5. Max: Z = 0.0822*(AW+BW) + 0.066*(AJ+BJ) + 0.074*(AP+BP)
  6. 6. Demand constraints (lbs) AW + BW <= 8,00,000 (Pre-determined because of quality of fruit available) AJ + BJ <= 10,00,000 (50000 cases * 20 lbs/case) AP + BP <= 20,00,000 (80000 cases * 25 lbs/case) Quality constraints For whole canned tomato 9AW + 5BW >= 8(AW + BW) Solving, 1AW – 3BW >= 0 For tomato juice 9AW + 5BW >= 6(AW + BW) Solving, 3AW – 1BW >= 0 For tomato paste . No constraints since paste is acceptable with B grade fruits.
  7. 7. Quantity constraints For A Grade AW + AJ + AP <= 6,00,000 (since only 0.6M lbs available) For B Grade BW + BA + BP <= 24,00,000 (Balance out of 3.0M lbs)
  8. 8. AW BW AJ BA AP BP Contribution profit 225340 45340 525000 175000 75000 225000 0 2000000 0.0822 0.0822 0.066 0.066 0.074 0.074 AW BW AJ BA AP BP USED AVAILABLE CANNED TOMATOES 1 1 0 0 0 0 700000 800000 JUICE 0 0 1 1 0 0 300000 1000000 PASTE 0 0 0 0 1 1 2000000 2000000 CANNED TOMATOES 1 -3 0 0 0 0 0 0 JUICE 0 0 3 -1 0 0 0 0 A GRADE 1 0 1 0 1 0 600000 600000 B GRADE 0 1 0 1 0 1 2400000 2400000 TOTAL QUANTITY DEMAND QUALITY QUANTITY
  9. 9. AW BW AJ BA AP BP contribution profit 45764 615000 205000 65000 195000 0 2000000 0.0822 0.0822 0.066 0.066 0.074 0.074 Total Quantity 232564 USED AVAILABLE CANNED TOMATOES 1 1 0 0 0 0 820000 880000 JUICE 0 0 1 1 0 0 260000 1000000 PASTE 0 0 0 0 1 1 2000000 2000000 CANNED TOMATOES 1 -3 0 0 0 0 0 0 JUICE 0 0 3 -1 0 0 0 0 A GRADE 1 0 1 0 1 0 680000 680000 B GRADE 0 1 0 1 0 1 2400000 2400000
  10. 10. • Gross Profit with 3.0M lbs= $ 45340. • Gross Profit with 3.08M lbs= $ 45764. • That translates into a situation wherein the company can earn more profit if it procures 80000 lbs of A grade tomato @ 8.5¢/lb, thereby, earning an extra profit of US$ 424.

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