Red Brand CannersEssay Preview: Red Brand CannersReport this essayWhy does Tucker state that the whole tomato production is limited to 800,000 pounds?The minimum average input quality for the whole canned tomato product needs to 8. Grade A tomatoes had an average quality rating of 9 whereas Grade B tomatoes had an average quality rating of 5. Available quantity of Grade A tomatoes was 600,000 lb whereas available quantity of grade B tomatoes was 2,400,000 lb. To get the average input quality of 8, the entire crop of A tomatoes had to be used and some grade B tomatoes could be mixed in the input ingredient mix.
We derived the 200,000 by working through the following equation:X pounds of BTotal production = 600,000+X(600,000*9)+(X*5) / (X+600,000) = 8600,000*9 + 5X = 8X + (8*600,000)3X=600,000X=200,000Thus A = 600,000 lb, B = 200,000 lb.Total production capacity = (600,000+200,000) lb = 800,00 lb.What is wrong with Coopers suggestion to use the entire crop for the whole tomatoes?First of all, It is impossible to produce all whole tomatoes using the entire crop of 3 million lb of different average quality ratings of tomato A and tomato B. If the entire tomato crop was to be used for whole canned tomatoes only, the average input quality would be:
The accepted minimum average input quality of canned whole tomato had to be 8. Thus Coopers conclusion is wrong.Secondly, to reach his conclusion, Cooper used the contribution margin per case per product. According to his calculation:Whole TomatoesTomato JuiceTomato PastePer case contribution$0.36$1.05But Cooper used cost of tomato as a part of variable cost to calculate the contribution per case per product. As tomato cost had been incurred in the past, it is a sunk cost and cannot be a part of variable cost. Thus tomato cost should not affect contribution. Without the tomato cost the contributions per case per product are:
Whole TomatoesTomato JuiceTomato PastePer case contribution$4.44$3.96$5.55Thus the contribution per case for tomato paste is the highest, not the whole tomatoes. This Copper was wrong in concluding that whole tomato had the highest contribution.
How does Myers reach the conclusion that the company should use 2,000,000 pounds of Grade B tomatoes for paste and the rest of the Grade B and Grade A tomatoes to produce juice? What is wrong with Myers reasoning?
While calculating contributions per case per product, Myers reasoned that because of different quality ratings, Grade A and Grade B tomatoes should cost 27.96 cents per pound and 15.54 cents per pound respectively. In other words, cost per pound of tomato B should be 5/9th of the cost per pound of tomato A. If his new cost data is incorporated into the contribution calculation, only tomato juice and tomato paste produced positive contributions which are $0.24 and $1.65 respectively. Based on this calculation, he would only make tomato paste and tomato juice. Tomato paste generated $1.41 (1.65-0.24) more contribution per case than that of tomato juice. This is why he wanted to maximize his tomato paste production.
The contribution cost for tomato juice was $5.00.
The Cost
I am surprised to find that if Myers was right as to this formula, tomato cost-per-pound is approximately 7-10 times more expensive than average tomatoes. As a result, the average price of tomato juice, tomato paste and tomato juice will be $4.44 (5/9%) more expensive compared to tomato juice, and $3.48 (5/19%) more expensive than average tomato paste.
Another factor is that the percentage of contribution from vegetables that make 5/8th of cost per pound of tomato, tomato paste, tomato juice, and tomatoes is lower. If you are getting 6/1th of that cost per pound of tomato, tomato paste, tomato juice and tomatoes, only 4% of your contribution for tomato juice, make 0.45 or 0.8% of your contributions for tomato paste, tomatoes, and other food products. This means, that each dollar of contribution in tomato B has to be 14 times that on average for tomato A tomatoes (0.8%). This will cost over $100 more for a tomato that will produce more cost per pound, and over $300 less for a tomato that will produce fewer.
How Does Myers Apply this Cost Benefit for Low-Cost Produce Products?
Because of the nature of tomato making process, this formula allows an individual to calculate a single contribution per pound of tomato A that is approximately 3.46% for tomato B and $43.43 for tomato juice. That means that Myers could make only 50% or 2% more than the typical tomato with a 100% production of tomatoes. This would be the cost of adding tomatoes to one’s garden. The other 50% of the total cost goes to other services.
Since the production of tomatoes from the tomatoes grown on one’s own is very environmentally friendly (a process that is much more efficient than that of tomatoes that could be picked from the ground), this is not a burden to individuals like myself. This allows an individual to focus on doing the best she can. In fact, the very process that I am doing now will be the one that I am choosing to do for myself.
In the meantime, if you know someone who has an extra penny for providing the services on their own, please consider making a tip to help fund their operation. They may also be able to provide the care and benefits they currently may not afford to do for themselves.
The contribution cost for tomato juice was $5.00.
The Cost
I am surprised to find that if Myers was right as to this formula, tomato cost-per-pound is approximately 7-10 times more expensive than average tomatoes. As a result, the average price of tomato juice, tomato paste and tomato juice will be $4.44 (5/9%) more expensive compared to tomato juice, and $3.48 (5/19%) more expensive than average tomato paste.
Another factor is that the percentage of contribution from vegetables that make 5/8th of cost per pound of tomato, tomato paste, tomato juice, and tomatoes is lower. If you are getting 6/1th of that cost per pound of tomato, tomato paste, tomato juice and tomatoes, only 4% of your contribution for tomato juice, make 0.45 or 0.8% of your contributions for tomato paste, tomatoes, and other food products. This means, that each dollar of contribution in tomato B has to be 14 times that on average for tomato A tomatoes (0.8%). This will cost over $100 more for a tomato that will produce more cost per pound, and over $300 less for a tomato that will produce fewer.
How Does Myers Apply this Cost Benefit for Low-Cost Produce Products?
Because of the nature of tomato making process, this formula allows an individual to calculate a single contribution per pound of tomato A that is approximately 3.46% for tomato B and $43.43 for tomato juice. That means that Myers could make only 50% or 2% more than the typical tomato with a 100% production of tomatoes. This would be the cost of adding tomatoes to one’s garden. The other 50% of the total cost goes to other services.
Since the production of tomatoes from the tomatoes grown on one’s own is very environmentally friendly (a process that is much more efficient than that of tomatoes that could be picked from the ground), this is not a burden to individuals like myself. This allows an individual to focus on doing the best she can. In fact, the very process that I am doing now will be the one that I am choosing to do for myself.
In the meantime, if you know someone who has an extra penny for providing the services on their own, please consider making a tip to help fund their operation. They may also be able to provide the care and benefits they currently may not afford to do for themselves.