National Cranberry Case Essay

Submitted By donzodonzo
Words: 409
Pages: 2

1. Purchase the light meter and hire an operator. A major unnecessary cost is being incurred in the form of cranberries being misidentified by the chief berry receiver. Half of the 450,000 bbls of cranberries labeled as No. 3 turned out to be No.2, each one costing $1.5 for a total overpayment of $337,500. The cost of a light meter operator would be around $26,000/yr and the system cost would be $40,000, the total cost would be $66,000. With a savings of $337,500 per year, the return on investment in the light meter system would be 5.1 (337,500 / $66,000).

2. Purchase one additional dryer to increase process capacity by almost 33%. The dryer can be purchased for $60,000. Process capacity would increase to 800 bbls/hr, because each dryer rates 200bbls/hr. As the wet berry flow rate increases to 800 bbls/hr, the bottleneck is still on the dryers because (1125-800=325bbls) are still left unprocessed and the separators can still process 800+375=1175bbls from 1200bbls/hr. However, the resulting flow rate increase of around 33% could cut overtime labor during the fall by as much as $72,000 (12,000 over time hours x $6/hr) each year. The return on investment would therefore be positive at 0.2 ($72,000-$60,000 / $60,000). However, if we are to buy 2 dryers, the dryer capacity increases to 1,000bbls/hr, but another bottleneck will occur at the separator stage it cannot process 375dryberries + 1000wet berries/hr. Thus, it is ideal to buy just one more dryer.

3. Dry holding bins should be converted to wet-dry combination bins only if management decides that the costs of waiting trucks (both financial and nuisance) is sufficient to justify the investment. Increasing the capacity of the holding bins would not increase the process