Answers to Red Brand Canners Case Part I

1. Based on the availability of 600,000 pounds of grade “A” tomatoes (grade 9), one can mix in
some grade “B” tomatoes (grade 5) to generate a mix of grade 8. Let X denote the pounds of
grade “B” tomatoes that can be mixed in. Then:
(600,000*9+X*5)/(600,000+X)=8.
Solving this, yields X=200,000 lbs for a total weight of 800,000 lbs.

2. Cooper’s suggestion restricts the usage of tomatoes to merely 800,000 lbs (as shown in 1).
The leftover tomatoes could be used profitably to at least make tomato paste. It might also
be more profitable to make use of the A tomatoes to produce some tomato juice as well, and
end up with a mix products that together produce the most profit.

3. In Exhibit 3, Myers attempt to prorate the unit cost per tomato (18 cents) based on the quality
of tomato (grade A or B). The first equation (1) indicates that the sum of 600,000 lb
multiplied by the unit cost per lb for grade A tomatoes (Z) and 2,400,000 lb multiplied by the
unit cost per lb for grade B tomatoes (Y) equals the total cost paid (3,000,000 lbs multiplied
by 18 cents per lb). The second equation (2) defines the relative relationship between the
unit prices for grade A and B tomatoes based on the relative “quality” points for the two
grades. Solving the two equations yields the values for the unit prices for the two grades.

Based on this one can state that the unit cost per lb for tomatoes of “quality of 1” is equal to
the value of Z/9 or Y/5. This is then used to find the adjusted fruit cost. For example, the
cost per case of whole tomatoes would be: (Z/9) $/lb *8*18 lb/case or $4.47 per case.
Similarly, for tomato juice the cost per case would be: (Z/9) $/lb * 6 * 20 lb/ case = $3.72 per
case.
Since Myers believes that tomato paste is the most profitable option, he would like to sell as
much tomato paste that demand allows, which is 80,000 cases or 2,000,000 lbs (80,000
cases*25lb per case). Beyond that Myers ranks tomato juice as the next profitable item and
so the remaining 400,000 lbs of grade B tomatoes and 600,000 lbs of grade “A” tomatoes
should be used for making tomato juice.
A fundamental shortcoming in the analysis is that the fact that the grade A tomatoes
implicitly cost the company more than the grade B tomatoes has nothing with the current task
at hand which is to maximize the operating profit for the season given the resources
(tomatoes) at hand. Indeed, tomatoes have already been purchased and, hence, their purchase
price is a “sunk” cost. It does not make sense to penalize the production of whole tomatoes
because of the cost already incurred in purchasing grade A tomatoes.

4. Let wA= weigh of tomato grade A allocated to produce whole tomatoes (lbs),
wB=weight of tomato grade B allocated to produce whole tomatoes (lbs),
jA=weight of tomato grade A allocated to produce whole tomatoes (lbs),
jB=weight of tomato grade B allocated to produce whole tomatoes (lbs),
pA=weight of tomato grade A allocated to produce whole tomatoes (lbs),

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 pB=weight of tomato grade B allocated to produce whole tomatoes (lbs).
The formulation that maximizes net income for the tomato manufacturing operation is given
below. First, the objective function is to maximize the generated income from selling the
various tomato products. The income from selling a case of a product type is the
contribution shown in Exhibit 2 plus the fruit cost. For each product type the income per
pound is obtained by dividing the income per case by the weight (lb) per case. Then the total
income for the product is the unit income per lb multiplied by the weight (in lbs) of tomatoes
used in producing the product type. The objective function is then:
Maximize ((1.20+3.24)*100)/18)*(wA+ wB) + ((0.36+3.60)*100)/20)*( jA+ jB) +
((1.05+4.50)*100)/25)*( pA+ pB)
The first type of constraint is that the mix of tomato grades used should ensure the required
scores for the whole tomatoes and the tomato juice products. No constraint is necessary for
the tomato paste product as using either tomato grade A or B would meet the score required
for tomato paste. For the whole tomatoes product, the combined score is 9*wA + 5* wB
should be ≥ 8*(wA+ wB) or wA- 3wB ≥ 0. Similarly, for the tomato juice product, 9*jA + 5*
jB should be ≥ 6*(jA+ jB) or 3jA - jB ≥ 0.
Another set of constraints is needed to limit production of each type of tomato product so as
to not to exceed demand. Finally, the usage of tomatoes should be limited to the amounts
available of each grade.
The complete formulation is then:
Maximize ((1.20+3.24)*100)/18)*(wA+ wB) + ((0.36+3.60)*100)/20)*( jA+ jB) +
((1.05+4.50)*100)/25)*( pA+ pB)
wA- 3wB ≥ 0 (whole tomatoes quality constraint)
3jA - jB ≥ 0 (tomato juice quality constraint)
wA+ wB ≤ 800,000*18 (whole tomatoes production less than demand)
jA+ jB ≤ 50,000*20 (tomato juice production less than demand)
pA+ pB ≤ 80,000*25 (tomato paste production less than demand)
wA+ jA+ pA ≤ 600,000 (grade A tomatoes usage less than available amount)
wB+ jB+ pB ≤ 2,400,000 (grade B tomatoes usage less than available amount)
wA, wB, jA, jB, pA, pB ≥ 0

5. In order to capture the possibility of ordering more grade A tomatoes, let eA denote the extra
weight of grade A tomatoes to be purchased. The formulation can be modified to capture the
cost (in the objective function) of purchasing the extra grade A tomatoes and the
corresponding increased availability of such tomatoes (grade A tomatoes usage constraint).
The new formulation is:
Maximize ((1.20+3.24)*100)/18)*(wA+ wB) + ((0.36+3.60)*100)/20)*( jA+ jB) +
((1.05+4.50)*100)/25)*( pA+ pB) – 0.255eA
wA- 3wB ≥ 0 (whole tomatoes quality constraint)
3jA - jB ≥ 0 (tomato juice quality constraint)
wA+ wB ≤ 800,000*18 (whole tomatoes production less than demand)
jA+ jB ≤ 50,000*20 (tomato juice production less than demand)

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pA+ pB ≤ 80,000*25 (tomato paste production less than demand)
wA+ jA+ pA - eA ≤ 600,000 (grade A tomatoes usage less than available amount)
wB+ jB+ pB ≤ 2,400,000 (grade B tomatoes usage less than available amount)
0 ≤eA ≤ 80,000 (maximum amount of extra grade A tomatoes available)
wA, wB, jA, jB, pA, pB, eA ≥ 0