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Red Brand

Canners Case
Exhibit 3.1
Product
24-212 whole
tomatoes
24-212 choice
peach halves
24-212 peach
nectar
24-212 tomato
juice
24-212 cooking
apples
24-212 tomato
paste

Exhibit 3.2
Product
Selling Price
Variable Costs:
Direct Labor
Variable OHD
Variable Selling
Packaging Mat'l.
Fruit1
Total Variable
Costs
Contribution
Less Allocated
OHD
Net Profit

Demand Forecasts
Selling Price per Demand Forecast
Case
(Cases)
$12.00

800,000

$16.20

10,000

$13.80

5,000

$13.50

50,000

$14.70

15,000

$11.40

80,000

Product Item Profitability


24-212 Whole
Tomatoes
$12.00

24-212 Choice
Peach Halves
$16.20

3.54
0.72
1.2
2.1
3.24

4.2
0.96
0.9
1.68
5.4

3.81
0.69
1.2
1.8
5.1

3.96
1.08
2.55
1.95
3.6

10.8
1.2

13.14
3.06

12.6
1.2

13.14
0.36

0.84
0.36

2.1
0.96

1.56
-0.36

0.63
-0.27

Product

Pounds per Case

Whole Tomatoes
Peach Halves
Peach Nectar
Tomato Juice
Cooking Apples
Tomato Paste

18
18
17
20
27
25

Exhibit 3.3

Marginal Analysis of Tomato Products

24-212 Peach
24-212
Nectar
Tomato Juice
$13.80
$13.50

Product
Selling Price
Variable Cost
(excl. Tomato
costs)
Tomato Cost
Marginal Profit

Exhibit 3.4
Product
Selling Price
Variable Cost
(excl. Tomato
costs)
Tomato Cost
Marginal Profit

Canned Whole
Tomatoes
$12.00

Tomato Juice
$13.50

Tomato Paste
$11.40

$7.56
$4.44
$4.47
($0.03)

$9.54
$3.96
$3.72
$0.24

$5.85
$5.55
$3.90
$1.65

Myers' Marginal Analysis of Tomato


Products
Canned Whole
Tomatoes
Tomato Juice
$12.00
$13.50

$7.56
$4.44
$4.47
($0.03)

$9.54
$3.96
$3.72
$0.24

Tomato Paste
$11.40

$5.85
$5.55
$2.33
$3.22

24-212 Cooking 24-212 Tomato


Apples
Paste
$14.70
$11.40
2.1
0.66
0.84
2.1
2.7

1.62
0.78
1.14
2.31
4.5

8.4
6.3

10.35
1.05

2.25
4.05

0.69
0.36

Q1)

Quality constraint: (9AC + 5BC)/(AC + BC) > 8


With 600,000 AC, BC can be at most 200,000 for a total of 800,000

Q2)

At most 800,000 can be used (see Q1)

Q3)

From Exhibit 3, tomato cost for one case of Canned whole = [(15.54 x 18/4) + (27.96 x 18 x 3/4)]/100 = $4.47
Paste is most profitable (according to Myers); Use as much B as can be sold for paste, i.e., 2,000,000.
Use as much A and B for juice (next most profitable) as can be sold, while providing at least quality level 6.
Hence, use 600,000 A and 400,000 B for juice, whereby whole crop is used.
Myers is wrong because costs already paid ('sunk cost') are allocated to products.

18/4) + (27.96 x 18 x 3/4)]/100 = $4.47

be sold for paste, i.e., 2,000,000.


while providing at least quality level 6.

Red Brand
Canners Case
AC
BC
AJ
BJ
AP
BP
Objective function
Contribution margins $0.247 $0.247 $0.198 $0.198 $0.222 $0.222
Profit
Tomato quantities 525,000 175,000 75,000 225,000
0
2,000,000 $676,300
Constraints
Canned
Juice
Paste
A limit
B limit
Canned quality
Juice quality

1
1

1
1

1
1
1

1
1
-3

1
3

-1

1
1

LHS
700,000
300,000
2,000,000
600,000
2,400,000
0
0

Optimal Solution from Solver


RHS
< 14,400,000
< 1,000,000
< 2,000,000
<
600,000
< 2,400,000
>
0
>
0

Optimal Solution from Solver


Slack
13,700,000
700,000
0
0
0
0
0

Red Brand
Canners Case
AC
BC
AJ
BJ
AP
BP
PC
PJ
PP
Objective function
Contribution margins $0.247 $0.247 $0.198 $0.198 $0.222 $0.222 -$0.008 -$0.057 -$0.033
Tomato quantities 600,000 205,000
0
195,000
0
2,000,000 15,000 65,000
0
Constraints
Canned
Juice
Paste
A limit
B limit
Canned quality
Juice quality
External A market

1
1

1
1

1
1
-3

1
1
1

1
1

-1
1

3
1

Profit
$677,620
LHS
820,000
260,000
2,000,000
600,000
2,400,000
0
0
80,000

Optimal Solution from Solver

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<
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>
>
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RHS
Slack
14,400,000 13,580,000
1,000,000
740,000
2,000,000
0
600,000
0
2,400,000
0
0
0
0
0
80,000
0