RED BRAND CANNERS

CASE ANALYSIS
Submitted by:
Samiksha Das
2018PGP324
Section A
Problem Statement
 To decide the optimum mix for Tomato products
 To analyze whether to purchase 80000 pounds of grade A
tomatoes

Decision Variables
All units are in pounds
 Xacw: Canned whole tomatoes produced using grade‘A’ tomatoes
 Xatj: Tomato juice produced using grade ‘A’ tomatoes
 Xatp: Tomato paste produced using grade ‘A’ tomatoes
 Xbcw: Canned whole tomatoes produced using grade‘B’ tomatoes
 Xbtj: Tomato juice produced using grade ‘B’ tomatoes
 Xbtp: Tomato paste produced using grade ‘B’ tomatoes

Contribution from various products:

 Cw = $1.48 / 18 = 0.082
 Cj = $1.32 / 20 = 0.066
 Cp = $1.85 / 25 = 0.074

Objective Function
Maximize Z= 0.082(Xacw + Xbcw) + 0.066(Xatj + Xbtj) + 0.074(Xatp + Xbtp)

Demand Constraints
Canned Whole tomatoes, Xacw + Xbcw < = (800000*18)
Tomato Juice, Xatj + Xbtj< = (50000*20)
Tomato Paste, Xatp + Xbtp< = (80000*25)

Quantity Constraints
Xacw+Xatj+Xatp < = 600,000 [20% of total produce]
Xbcw+Xbtj+Xbtp <= 2400,000 [80% of total produce]
9Xacw + 5Xbcw >= 8(Xacw+Xbcw) [Canned whole tomatoes]
9Xatj + 5Xbtj >= 6(Xatj + Xbtj) [Tomato juice]

Using Excel Solver, the optimal solution obtained is: -

 Xacw = 525000
 Xatj = 75000
 Xatp = 0
 Xbcw = 175000
 Xbtj = 225000
 Xbtp = 2000000
 Objective function, Z = $225355.56

When extra 80,000 pounds of grade A tomatoes are available

The sensitivity report shows that the allowable increase in the
quantity constraint is 600000. With an increase of 80000 pounds, the
increase in contribution becomes = (80000*0.090333) = $7226.64,
where 0.090333 is the shadow price.
Hence, net contribution = $232582.2

All values are in $

 Cost of Tomatoes = 3 million * 6 cents = 180,000
 Profit in normal scenario = 225355.56 - 180000 = 45355.56
 Profit with costs as proposed by Myers = 225355.56 - 180240 =
45115.56
 Profit in scenario 2 = 232582.2 – (180000 + 6800) = 45782.8

Since the profit in scenario 2, with 80000 more grade A tomatoes is

higher than normal scenario, the company should opt for buying the
extra tomatoes.

Excel sheet attached below:

· Xacw : Canned whole tomatoes produced using grade‘A’ tomatoes
· Xatj : Tomato juice produced using grade ‘A’ tomatoes
· Xatp : Tomato paste produced using grade ‘A’ tomatoes
· Xbcw : Canned whole tomatoes produced using grade‘B’ tomatoes
· Xbtj : Tomato juice produced using grade ‘B’ tomatoes
· Xbtp : Tomato paste produced using grade ‘B’ tomatoes
Constraints
Canned Whole tomatoes,acwX + Xbcw < = (800000*18) 0
Tomato Juice, aXtj + Xbtj < = (50000*20) 0
Tomato Paste, aXtp + Xbtp < = (80000*25) 0
Xacw +Xatj +Xatp < = 600,000 [20% of total produce] 0
Xbcw +Xbtj +Xbtp <= 2400,000 [80% of total produce] 0
9Xacw + 5Xbcw >= 8(Xacw +Xbcw ) [Canned whole tomatoes] 0
9Xatj + 5Xbtj >= 6(Xatj + Xbtj ) [Tomato juice] 0

Maximize Z= 0.082(X
acw + Xbcw ) + 0.066(X
atj + Xbtj ) + 0.074(X
atp + Xbtp )