In: Advanced Math
Current Issues
One of the biggest issues facing this company is the rise in prices of raw materials, especially the iconic almond, which due to drought in California has seen a price rise in recent years. In order to diversify their product line, Brown & Haley has started to expand its repertoire to including other nuts, such as cashews and macadamia nuts. They also have a project underway to test a new product line of packaged mixed nuts. Note that this scenario is fictional and the details do not represent actual operations of Brown & Haley.
The Scenario
The company is considering three nut mixes for inclusion in the new product line: Regular Mix, Deluxe Mix, and Holiday Mix. Each mix is made from 5 nuts in different combinations:
An accountant at Brown & Haley completed a cost analysis and determined that the profit contribution per pound is $1.65 for the Regular Mix, $1.90 for the Deluxe Mix, and $2.35 for the Holiday Mix.
Different nuts come from different suppliers. They are shipped in bulk containers and ordering a partial container is not possible. The currently available container sizes and costs are as follows:
Type of Nut |
Container Size (pounds) |
Cost per Container |
Almond |
6000 |
$7800 |
Brazil |
7500 |
$7350 |
Filbert |
7500 |
$7150 |
Pecan |
6000 |
$7200 |
Walnut |
7500 |
$7450 |
One container of each of the types of nuts has been ordered and is on the way.
The sales and marketing teams have projected that initial demand for the different types of mixes will be as follows:
Type of Mix |
Orders (pounds) |
Regular |
10,000 |
Deluxe |
5,000 |
Holiday |
3,000 |
The president of Brown & Haley wants to commit to producing enough of the various mixes to meet the projected initial demand, even if not immediately profitable, in order to introduce these new mixes to the market.
PLEASE READ THE QUESTIONS
PLEASE READ THE QUESTIONS
PLEASE READ THE QUESTIONS
ANSWER:
Given That Current Issues One of the biggest issues facing this company is the rise in prices of raw materials, especially the iconic almond, which due to drought in California has seen a price rise in recent years. In order to diversify their product line, Brown & Haley has started to expand its repertoire to including other nuts, such as cashews and macadamia nuts. They also have a project underway to test a new product line of packaged mixed nuts. Note that this scenario is fictional and the details do not represent actual operations of Brown & Haley.
The Scenario
The company is considering three nut mixes for inclusion in the new product line: Regular Mix, Deluxe Mix, and Holiday Mix. Each mix is made from 5 nuts in different combinations:
An accountant at Brown & Haley completed a cost analysis and determined that the profit contribution per pound is $1.65 for the Regular Mix, $1.90 for the Deluxe Mix, and $2.35 for the Holiday Mix.
Different nuts come from different suppliers. They are shipped in bulk containers and ordering a partial container is not possible.
So
As per policy, only 4 parts of a question is allowed to answer at a time, so answering first five parts here:
Req1) | Almond | Brazil | Filbert | Pecan | Walnut |
cost per container | 7800 | 7350 | 7150 | 7200 | 7450 |
Pounds | 6000 | 7500 | 7500 | 6000 | 7500 |
Cost per pound,$ | 1.3 | 0.98 | 0.953333333 | 1.2 | 0.993333333 |
Req2) | |||||
Regular mix | 15% | 25% | 25% | 10% | 25% |
Deluxe mix | 20% | 20% | 20% | 20% | 20% |
Holiday mix | 25% | 15% | 15% | 25% | 20% |
Total | 60% | 60% | 60% | 55% | 65% |
Initial order: | |||||
Requirement of nuts: | |||||
Regular mix 10000 | 1500 | 2500 | 2500 | 1000 | 2500 |
Deluxe mix 5000 | 1000 | 1000 | 1000 | 1000 | 1000 |
Holiday mix 3000 | 750 | 450 | 450 | 750 | 600 |
Each nut required: | 3250 | 3950 | 3950 | 2750 | 4100 |
Optimized profit: | Pounds | Contri per pound | Profit | ||
Regular mix | 10000 | 1.65 | 16500 | ||
Deluxe mix | 5000 | 1.9 | 9500 | ||
Holiday mix | 3000 | 2.35 | 7050 | ||
Optimized profit= | 33050 | ||||
Req3) Almond and Pecan should be pursued in order to increase profit | |||||
because both the nuts equavalent important to fulfil order and shipment | |||||
carried these nuts 20% short of the other nuts. | |||||
Req4) Yes, Almonds can be purchased as cheaper to the Shippment cost. | |||||
Increase in Profit per pound: | |||||
Almond | Increase in profit | ||||
of reduction in | |||||
cost by $0.30 | |||||
Regular mix | 15% | 0.05 | |||
Deluxe mix | 20% | 0.06 | |||
Holiday mix | 25% | 0.08 | |||
Req5) No, filberts should not be purchased as purchase cost is higher | |||||
to Shippment cost... |