INTRODUCTION TO QUANTITATIVE DECISION MAKING

ASSIGNMENT – 1

CASE : RED BRAND CANNERS

Submitted by : Razal Faizal

Section – A
PGP -1
INTRODUCTION

Red Berry Canners was a medium-sized company that canned and distributed
variety of fruit and vegetable products under private brands. One of the major
crop that the company converts to value-added products is tomato. Different
products like canned whole tomatoes, tomato juice and tomato paste are made
by the company. It also has products like choice peache halves, peach nectar and
cooking apples too.

CASE FACTS AND ASSUMPTIONS

1) Company procure tomato pertaining to two grades – Grade ‘A’ and Grade
‘B’. This grading is done on the basis of quality of tomato and it is done by
the company on the basis of allotting scores varying from zero – ten. Grade
“A” tomatoes averaged nine pounds per pound and Grade “B” averaged
five points per pound.

2) The percentage distribution of the current year incoming lot pertaining to

Grade “A” and Grade “B” are 20% and 80% respectively. The incoming
tomato was estimated to be 30,00,000 pounds and hence Grade A is
6,00,000 and Grade B is 24,00,000 pounds

3) The company sells all of the whole canned tomato they produce while the
demand for tomato paste and juice are limited

4) Average delivered price for the tomato as per the contract is 18 cents per
pound

OBJECTIVE AND PROBLEM STATEMENT

The objective of the company is to allot Grade A and Grade B tomatoes among
the different products in such a way that the profit is maximized or the total
contribution is maximized. The company has to look into the following constraints
while looking into maximizing the objective

1) Availability – As was discussed earlier the company has signed a contract

and as per the contract the incoming produce is 30,00,000 pounds and the
 percentage of Grade “A” and Grade “B” are 20% and 80% respectively thus
limiting the available input

2) Demand – All the three products canned whole tomatoes , Juice and paste
are having forecasted demand which acts as a constraint in production

3) Quality – As per the case the the minimum average input quality for canned
whole tomatoes was eight points per pound and that for juice was 6
points per pound and paste can be made fully from grade B which has
average 5 points per pound

MATHEMATICAL REPRESENTATION AND SOLUTION

The objective function is based on the weight of grade A and grade B tomoatoes
allocated to different products like whole canned, juice and paste

Let us split Grade A among these three products in the following ways

W(a) – Weight of Grade A required for Whole canned (in lb)

J(a) - Weight of Grade A required for Juice (in lb)
P(a) – Weight of Grade A required for paste (in lb)

Let us split Grade B among the three product lines in the following ways

W(b) – Weight of grade B required for whole canned (in lb)

J(B) – Weight of grade B required for Juice (in lb)
P(a) – weight of grade B required for paste (in lb)

Contribution per can are as follows as per Mayers calculation

● According to Myers the procurement of tomato is done on the basis of a
contract and the cost is already sunk cost hence the contribution is as
below

1) Whole canned - $4.44 per can

=$4.44/18lb = $ 0.247 /lb
 2) Tomato Juice - $3.96 per can
= $3.96/20lb = $0.198/lb

3) Tomato Paste - $5.55 per can

= $5.55/25lb = $0.222/lb

● Objective function :

Max: 0.247(W(a)+W(b)) + 0.198(J(a)+J(b)) + 0.222(P(a)+P(b))

● Constraints

Demand Constraints :

1) W(a) + W(b) <= 8,00,000 lbs ( As per the case whole tomato
production was limited to 8,00,000 pounds )

2) J(a) + J(b) <=10,00,000 ( 50,000 cans X 20 Lbs per can )

3) P(a) + P(b) <=20,00,000 ( 80,000 cans X 25 lbs per can )

Availability:

1) W(a) + J(a) + P(a) <= 6,00,000 lbs

2) W(b) + J(b) + P(b) <= 24,00,0000 lbs

Quality

1) 9W(a) + 5W(b) / (W(a) + W(b)) >=8

2) 9J(a) + 5J(b) / (J(a) + J(b)) >=6
3) 9P(a) + 5P(b)/ (P(a) + P(b)) >=5

By solving Wa = 525000 Wb = 175000, Ja= 75000, Pa= 0 , Pb = 20000000