Cadman Food Processors Essay

3976 Words Aug 18th, 2013 16 Pages
Managerial Data Analysis | Cadman Food Processors |

Submitted To: Professor D. Cook
Submitted By: Group 3

Executive Summary

The VP of Operations of Cadman Foods faces the decision of having to allocate three million pounds of tomatoes to the production of canned whole tomatoes, tomato juice or tomato paste. Subsequent to that decision, the VP needs to determine whether to acquire 80,000 pounds of additional “A” quality tomatoes at $0.425 per pound. Bill Cooper, the Controller at Cadman Foods has recommended that Cadman produce the maximum quantity of canned whole tomatoes based on Dan Tuckers assessment of the tomato crop. By logical extrapolation, this would result in the remainder of the crop being allocated to the production
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In determining the net profit for each product line, Bill Cooper calculated the difference between the selling price and the combined input costs as per the formula below.

Net Profit=Selling Price-Variable Costs Including Fruit- Allocated Overhead
Figure [ 1 ]: Bill Cooper's Net Profit Calculation

Bill Cooper factored in allocated overhead costs for each line based on what we assume to be his production estimates. In his analysis, he determined that incremental profit was greatest on whole tomatoes ($0.60) and his production allocation is based off of this metric. Based on his analysis, the contribution to net profit per pound of tomato can be summarized as follows:

CAW= CBW = 0.618=0.033 | CAJ= CBJ =0.4520= 0.0225 | CAP= CBP =0.625= 0.024 |
Figure [ 2 ]: Bill Coopers Contribution Calculation
Dan Tucker, the Production Manager at Cadman, is said to have brought to Bill’s attention that based on the crop quality, whole tomato production would be limited to 800,000 pounds or 44,444 cases ( [ Table 1 ]). Dan arrived at this conclusion by taking into account the 600,000 pounds of “A” quality tomatoes available and the minimum required average score of 8 required for whole canned tomato production.

Min Whole Tomato Average Score=600×9+ (UBW×5)600+UBW=8
∴UBW=200
Figure [ 3 ]: Determination of Maximum Whole Tomato Production
With the remaining

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