CRIMSON BRAND CANNERS
On Wednesday, September 12, 1995, Mister. Mitchell Gordon, vice president of operations, asked the control, the revenue manager, plus the production manager to meet with him to discuss the amount of tomato products to pack that season. The tomato plants, which was purchased by planting, was beginning to arrive at the cannery, and packaging operations would have to be began by the subsequent Monday. Crimson Brand Canners was a medium-sized company which will canned and distributed many different fruit and vegetable items under private brands in the western states.
Mr. William Cooper, the controller, and Mr. Charles Myers, the sales manager, were the first to arrive in Mr. Gordon's workplace. Dan Tucker, the production manager, came in a few minutes later and said that he had picked up Produce Inspection's latest estimate in the quality from the incoming tomato plants. According to their report, regarding 20 percent with the crop was grade " A" quality and the outstanding portion of 3 of the, 000, 000-pound crop was grade " B. "
Gordon asked Myers about the demand to get tomato goods for the coming year. Myers responded that for any practical purposes they may sell all the whole canned tomatoes they will could create. The anticipated demand for tomato juice and tomato substance, on the other hand, was limited. The sales administrator then passed around the newest demand forecast, which is proven in Show 1 . He reminded the group the fact that selling prices have been set in lumination of the long lasting marketing strategy with the company, and potential product sales had been forecasted at the costs.
EXHIBIT 1 Demand Forecasts
SELLING PRICEDEMAND FORECAST
ITEM PER CASE (CASES)
24-2 1/2 Entire Tomatoes$9. 00800, 000
24-2 1/2 Decision Peach Halves$15. 40 15, 000
24-2 1/2 Peach Nectar$14. 60 5, 500
24-2 .5 Tomato Juice$8. 50 40, 000
24-2 1/2 Food preparation Apples$12. 80 15, 500
24-2 1/2 Tomato Paste$7. 80 70, 000
Invoice Cooper, following looking at Myer's estimates of demand, said that it looked like the company " should utilize the entire plants for complete tomatoes and really should do quite nicely (on the tomato crop) this year. " With the fresh accounting program that had been set up, he had had the opportunity to calculate the contribution for each item, and in respect to his analysis the incremental profit on the whole tomato vegetables was greater than for any other tomato item. In May, following Red Brand has agreed upon contracts agreeing to purchase the grower's development at an typical delivered selling price of 12 cents per pound, Cooper had calculated the tomato products' contributions (see Display 2).
Lalu Tucker brought to Cooper's attention that, although there was ample production capacity, it was not possible to produce most whole tomato vegetables as also small some of the tomato crop was " A" quality. Reddish colored Brand employed a statistical scale to record the caliber of both uncooked produce and prepared products. This scale happened to run from absolutely no to ten, the higher quantity representing better quality. Rating tomato vegetables according to the scale, " A" tomatoes averaged nine points per pound and " B" tomatoes proportioned 4. your five points per pound. Tucker noted the fact that minimum average input quality for discontinued whole tomatoes was almost eight. 25, and for juice it had been 7. a few points every pound. Substance could be produced entirely by " B" grade tomatoes. This means that complete tomato development was limited by the availability of grade A tomatoes.
Gordon stated that the was not a real limitation. He had been recently solicited to purchase any amount up to 90, 000 pounds of level " A" tomatoes at 15 pennies per pound and at that time had turned down the offer. He believed, however , the tomatoes were still readily available.
EXHIBIT 2 Product Item Profitability
24-2 1/224-2 1/224-2 1/224-2 1224-2 .5 24-2 1/2