Question: J’s, Inc., makes three nut mixes
J’s, Inc., makes three nut mixes for sale to grocery chains located in India. The three mixes,
referred to as the Regular Mix, the Deluxe Mix and the Holiday Mix, are made by mixing different percentages of five types of nuts.
In preparation for the next production period, TJ’s has just purchased the following shipments of nuts at the prices shown:
The Regular Mix consists of 15 per cent almonds, 25 per cent Brazil nuts, 25 per cent filberts, 10 percent pecans and 25 per cent walnuts. The Deluxe Mix consists of 20 per cent of each type of nut, and the Holiday Mix consists of 25 per cent almonds, 15 percent Brazil nuts, 15 per cent filberts, 25 per cent pecans and 20 per cent walnuts.
TJ’s accountant analyzed the cost of packaging materials, sales price per kilo and so forth, and
determined that the profit contribution per kilo is E1.65 for the Regular Mix, E2.00 for the Deluxe Mix and E2.25 for the Holiday Mix. These figures do not include the cost of specific types of nuts in the different mixes because that cost can vary greatly in the commodity markets.
Customer orders already received are summarized here:
Because demand is running high, it is expected that TJ’s will receive many more orders than can be satisfied.
TJ’s is committed to using the available nuts to maximize profit; nuts not used will be given to a local charity. Even if it is not profitable to do so, TJ’s president indicated that the orders already received must be satisfied.
Required:
Perform an analysis of TJ’s product-mix problem, and prepare a report for TJ’s president that summarizes your findings. Be sure to include information and analysis on the following:
1. The cost per kilo of the nuts included in the Regular, Deluxe and Holiday mixes.
2. The optimal product mix and the total profit contribution.
3. Recommendations regarding how the total profit contribution can be increased if additional quantities of nuts can be purchased.
4. A recommendation as to whether TJ’s should purchase an additional 1000 kilos of
almonds for E1000 from a supplier who overbought.
5. Recommendations on how profit contribution could be increased (if at all) if TJ’s does not
satisfy all existing orders.
Transcribed Image Text:
Туре of Cost per Shipment Amount (kilos) Nut Shipment ($) Almond 6000 7500 Brazil 7500 7125 Filbert 7500 6 750 Pecan 6000 7 200 Walnut 7500 7 875 Type of Mix Orders (Kilos) Regular 10 000 Deluxe 3 000 Holiday 5 000
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