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Case Study – Red Brand Canners

Case Study                                    Red Brand Canners

Submission Date                               8-Oct-2009

Class                                         EPGP– 09-10

Subject                                       Decision Analysis


Instructor                                    Prof. N. Ravichandran


Submitted by
                                                       Abhishek Pangaria
                                                       Mandeepak Singh
                                                       Rajendra Inani
                                                       Saravanan Logu
                                                       Tarandeep Singh
                                                       Vivek Edlabadkar




                                              Table of contents


Optimized Product Mix for Maximization of Profit........................................................................2
Option to buy additional Grade ‘A’ Tomato from outside and produce Canned Whole Tomato...4




                                                       Page 1 of 5
Case Study – Red Brand Canners



   Optimized Product Mix for Maximization of
                    Profit

     Product item            Whole Tomato         Tomato juice   Tomato Paste

Selling price                      4.00               4.50           3.80

     Weight per case (Lb)          18                  20             25

        Direct labor (US$)         1.18               1.32           0.54
      Variable OHD (US$)           0.24               0.36           0.26
    Variable selling (US$)         0.40               0.85           0.38
 Packaging material (US$)          0.70               0.65           0.77
Total Variable Cost                2.52               3.18           1.95

Contribution per Case              1.48               1.32           1.85
including Tomato cost
(US$)

Contribution per Lb with          0.0822             0.0660         0.0740
tomato cost (US$)
Cost of Tomato / Lb (US$)         0.0600             0.0600         0.0600

Net Contribution / Lb             0.0222             0.0060         0.0140
(US$)

             Grade A (Lb)        525000               75000
             Grade B (Lb)        175000              225000        2000000
Optimum Tomato used
for production (Lb) *            700000              300000        2000000

Contribution (US$)               15555.56            1800.00       28000.00

Total Contribution (US$)                          45355.56

                                    Page 2 of 5
Case Study – Red Brand Canners

*Optimum Tomato Product mix based on quality is arrived based on class exercise dated 7   th
                                                                                               Oct’09




                                           Page 3 of 5
Case Study – Red Brand Canners




 Option to buy additional Grade ‘A’ Tomato
  from outside and produce Canned Whole
                   Tomato
                                      External Gr. ‘A’    Available Gr. ‘B’
                                         Tomato               Tomato
  Mix Ratio of Tomato needed for                  3                1
  Canned Whole Tomato based on
  quality factor *

  Weight of Tomatoes needed per               13.50               4.50
  case (Lb)
  Total case weight = 18 Lb

  Cost of Tomato per Lb (US$)                0.085                0.06
  Cost of Tomato per case (US$)              1.1475               0.27

  Total Cost of Tomato (US$)                 1.4175


                           Product item                   Whole
                                                         Tomato
           Selling price                                   4

           Total Variable Cost                            2.52

           Contribution per Case including tomato
           cost (US$)                                     1.48
           Contribution per Lb with tomato cost (US$)     0.082
           Cost of Tomato / Lb (US$)                      1.418

           Net Contribution / Lb (US$)                   -1.448


                                    Page 4 of 5
Case Study – Red Brand Canners
Recommendation – Externally purchased Grade ‘A’ Tomato provide
negative contribution, so not a good option.




                                 Page 5 of 5

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Da red brand canners case study

  • 1. Case Study – Red Brand Canners Case Study Red Brand Canners Submission Date 8-Oct-2009 Class EPGP– 09-10 Subject Decision Analysis Instructor Prof. N. Ravichandran Submitted by  Abhishek Pangaria  Mandeepak Singh  Rajendra Inani  Saravanan Logu  Tarandeep Singh  Vivek Edlabadkar Table of contents Optimized Product Mix for Maximization of Profit........................................................................2 Option to buy additional Grade ‘A’ Tomato from outside and produce Canned Whole Tomato...4 Page 1 of 5
  • 2. Case Study – Red Brand Canners Optimized Product Mix for Maximization of Profit Product item Whole Tomato Tomato juice Tomato Paste Selling price 4.00 4.50 3.80 Weight per case (Lb) 18 20 25 Direct labor (US$) 1.18 1.32 0.54 Variable OHD (US$) 0.24 0.36 0.26 Variable selling (US$) 0.40 0.85 0.38 Packaging material (US$) 0.70 0.65 0.77 Total Variable Cost 2.52 3.18 1.95 Contribution per Case 1.48 1.32 1.85 including Tomato cost (US$) Contribution per Lb with 0.0822 0.0660 0.0740 tomato cost (US$) Cost of Tomato / Lb (US$) 0.0600 0.0600 0.0600 Net Contribution / Lb 0.0222 0.0060 0.0140 (US$) Grade A (Lb) 525000 75000 Grade B (Lb) 175000 225000 2000000 Optimum Tomato used for production (Lb) * 700000 300000 2000000 Contribution (US$) 15555.56 1800.00 28000.00 Total Contribution (US$) 45355.56 Page 2 of 5
  • 3. Case Study – Red Brand Canners *Optimum Tomato Product mix based on quality is arrived based on class exercise dated 7 th Oct’09 Page 3 of 5
  • 4. Case Study – Red Brand Canners Option to buy additional Grade ‘A’ Tomato from outside and produce Canned Whole Tomato External Gr. ‘A’ Available Gr. ‘B’ Tomato Tomato Mix Ratio of Tomato needed for 3 1 Canned Whole Tomato based on quality factor * Weight of Tomatoes needed per 13.50 4.50 case (Lb) Total case weight = 18 Lb Cost of Tomato per Lb (US$) 0.085 0.06 Cost of Tomato per case (US$) 1.1475 0.27 Total Cost of Tomato (US$) 1.4175 Product item Whole Tomato Selling price 4 Total Variable Cost 2.52 Contribution per Case including tomato cost (US$) 1.48 Contribution per Lb with tomato cost (US$) 0.082 Cost of Tomato / Lb (US$) 1.418 Net Contribution / Lb (US$) -1.448 Page 4 of 5
  • 5. Case Study – Red Brand Canners Recommendation – Externally purchased Grade ‘A’ Tomato provide negative contribution, so not a good option. Page 5 of 5