Assignments

Answer the following general questions:

1. Why does Tucker state that the whole tomato production is limited to 800,000
pounds? (i.e. where does the number 800,000 come from?)
2. What is wrong with Coopers suggestion to use the entire crop for whole tomatoes?
3. 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?
4. Myers calculated the tomato cost for Whole Tomato cans to be $4.47 per can (see
Exhibit 3). Explain how? This figure is a bit rounded (from 4.469).
Set up a linear programming model and solve it with Solver. Answer sensitivity
analysis questions:
5.
Without including the possibility of the additional purchases suggested by
Gordon, formulate as an LP the problem of determining the optimal canning policy.
Use the appropriate parameters from one of the exhibits shown below.
6.
Answer the following questions about the optimal solution:
a.
How much of each tomato grade will be used for the production of each
product?
b.
How much of each product is produced?
c.
What is the actual average quality per pound of the whole tomato and the
juice?
d.
What is the net profit obtained after netting out the cost of the crop?
7.
Answer the following sensitivity analysis questions:
a.
Is additional purchase of up to 80,000 pounds of grade A should be
undertaken at a price of $0.085? Can you tell exactly how much should be
purchased?
b.
Suppose the Market Research Department feels that it can increase
demand for the juice product by 25,000 cases by starting an advertising campaign.
How much should RBC be willing to pay for such a campaign?
c.
Suppose the price of juice increased 30 cents per case. What will happen
to the optimal solution?
d.
Suppose an additional lot of 50,000 pounds of grade B tomatoes
becomes available. How much should RBC be willing to pay for this lot?
Model Modifications:

8.

How should your model be modified to include the possibility of the additional purchases
suggested by Gordon? Find at which cost per pound it becomes optimal to purchase
additional amount of grade A tomatoes. Assume the additional amount available is 80,000
pound. Solve the new model and state the optimal solution.
8. Suppose unused tomatoes could be sold at 18 cents per pound. Change your formulation and
resolve.

Exhibit 1: Demand forecasts and usage

Product
Whole Tomato
Tomato Juice
Tomato Paste

Demand
Forecast (cases)
800,000
50,000
80,000

Pound
per case
18
20
25

Exhibit 2: Cooper's product item profitability

Product
Selling price
Variable costs:
Direct labor
Variable OHD
Variable Selling
Packaging
Tomato
Total Variable costs
Contribution
Less Allocated OHD
Net Profit

Whole
Tomatoes
$12
3.54
0.72
1.2
2.1
3.24
10.8
1.2
0.84
0.36

Tomato
Juice
$13.50

Tomato
Paste
$11.40

3.96
1.08
2.55
1.95
3.6
13.14
0.36
0.63
-0.27

1.62
0.78
1.14
2.31
4.5
10.35
1.05
0.69
0.36

Exhibit 3: Myers' Marginal Analysis

Z = Cost per pound of 'A' tomato in cents
Y = Cost per pound of 'B' tomato in cents
(1) 600,000Z+2,400,000Y = (3,000,000)(18cent)
(2)

Z Y

9
5
Z = 27.93 cents
Y = 15.52 cents

Product
Selling Price
Variable cost
(excluding Tomato cost)
Tomato cost
Marginal Profit

Whole
Tomatoes
$12.00
$7.56

Tomato
Juice
$13.50
$9.54

Tomato
Paste
$11.40
$5.85

4.44
$4.47
($0.03)

3.96
$3.72
$0.24

5.53
$3.90
$1.65