The following information is the COMPLETE CASE STUDY. NO MISSING DATA. Devine Co
ID: 375494 • Letter: T
Question
The following information is the COMPLETE CASE STUDY. NO MISSING DATA. Devine Confections, a candy company, produces 4 nut products: Whole, Cluster, Crunch, Roasted. The capacity of the company fell behind the demand. Competition and increasing raw material prices have also placed pressure on the company's profit margins, so the company needs to operate as efficiently as possible. The company's C-Level Management started planning for the upcomming (current) fiscal year. Prior to starting, they secured the required information. The following information is attached as worksheet reports from the following functional departments:
A. Sales & Marketing: Sales forecast -- most likely and upper limit sales projections; Price adjustments for the new planning period.
B. Procurement Departement: The critical raw materials during this planning period (availability); and cost increases for all direct materials.
C. Human Resources Department: The historical wage increase data for adjustements to direct labor.
D. Manufacturing Department (Operational): Machine times required per unit product; machine capacities; raw material required per unit of product.
E. Prior year's financials (prior planning period): Revenues, variable costs, fixed costs, sales volumes.
1. What is the optimal production mix?
2. Is the solution unique?
3. If the company needs to reduce the production of one product, which should it be?
4. If marketing wants to increase the marketing budget to increase the potential market share, how much should you authorize, if any, if you are the CEO?
5. If the company had an opportunity to acquire additonal resources, what resource(s) should be increased and what is the max cost the manager should be willing to pay?
6. If the product manager working with the sales group wanted to "re-market" the Whole product as a premium candy by changing the pakaging without adding cost, what is the min price for which it should be sold?
7. The director of sales examined the cusstomer order that was accepted in advance during the last planning period for delivery during this period. Determine how much she should be willing to discount the unit price to the customer in order to induce that customer to modify the (accepted) purchase order for a smaller delivery quantity.
8. The original return-on-sales (ROS) and the new ROS after optimization. [ROS=Total Net Profit/Total Revenues]
9. The manufacturing engineering manager looked at updating the manufacturing process for the Cluster product line. Determine a viable target for the technical coefficients (minimum attractive values).
HINT: Model Based On Marginal Analysis
Since the fixed costs are independent of volumes and are not expected to be impacted by inflation during the next planning cycle, develop a model to maximize contribution margins (Revenues less variable expenses). Add the fixed costs back AFTER running the model. Re-apportion the fixed cost based on the proportion of units manufactured (of a particular product) to the total units produced in the factory. Carry all calculations to a minimum of 3 decimal places, and then round the final results to the nearest penny.
NOTE: Run SOLVER with all 3 REPORTS specified. Use the reports to answer the questions and use the numbers from the reports to develop additional equations as necessary. DO NOT attempt to answer the questions using the "trial and error" method, except to vealidate your answers.
Based on a combination of time series forecasts, input from the senior sales staff, and industry climate reports, the sales department woking with marketing's researchers determined the sales numbers below. The optimistic figures also consider the firms market share of their adressable market segment, the competition, and short-term market saturation 1000's of Units Crunch Cluster Whole Roasted 100 75 N/A NA 25 10 50 45 Most Likehy Pessimestic Outstanding Sales Contracts for next quarter Purchase orders from customers confirmed with committed delivery.) Note that this is a contractual obligation to deliver! Crunch Cluster Whole Roasted Accepted Customer P.Os The director of sales will increase the prices offall products by 3% across the board. This will increase the revenues ahead of inflation on their raw materials.Explanation / Answer
1. One company's Product mix (also known as product assortment) refers to the variety of products the business offers its customers. Manufacturers and retailers must determine the optimal product mix for their business. An optimal mix maximizes the potential unit sales while maintaining the company's profitability. When you are determining your product mix, you must balance both the short term and long term goals of the company.
Example:- A mix that results in the highest sales for the next year may not set the company up for future growth.
2.Yes, the solution is unique.
3. It should be Chocolates, As the available Pounds is less caompare to Nuts.
4. Complacency is not an option in today's marketplace. Changeable buying behavior, channel and technology proliferation, data profusion, these are just a few of the realities marketers face today that necessitate transformation. Hence, As CEO we would mainly focus on the profit as well as investments.
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