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Essentials of Business Analytics (MindTap Course List)
Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter15: Decision Analysis
Section: Chapter Questions
Problem 2P: Southland Corporation’s decision to produce a new line of recreational products resulted in the need...
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5. A supplier has offered us 1200 pounds of filberts for $950. Should these filberts be purchased? If yes, how much would profits increase?

 

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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 Almond Container Size (pounds) Cost per Container $7800 6000 $7350 $7150 Brazil 7500 Filbert 7500 Ресan 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 Regular Deluxe Orders (pounds) 10,000 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.
Transcribed Image Text: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 Almond Container Size (pounds) Cost per Container $7800 6000 $7350 $7150 Brazil 7500 Filbert 7500 Ресan 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 Regular Deluxe Orders (pounds) 10,000 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.
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: The Regular Mix consists of 15% almonds, 25% Brazil nuts, 25% filberts, 10% pecans, and 25% walnuts The Deluxe Mix consists of 20% of each type of nut The Holiday Mix consists of 25% almonds, 15% Brazil nuts, 15% filberts, 25% pecans, and 20% walnuts 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.
Transcribed Image Text: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: The Regular Mix consists of 15% almonds, 25% Brazil nuts, 25% filberts, 10% pecans, and 25% walnuts The Deluxe Mix consists of 20% of each type of nut The Holiday Mix consists of 25% almonds, 15% Brazil nuts, 15% filberts, 25% pecans, and 20% walnuts 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.
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