Case Study Red Brand Canners
RED BRAND CANNERS
On Monday, November 15th, 2004, Mitchell Gordon, Vice-President of Operations, asked the Controller, the Sales Manager, and the Production Manager of Red Brand Canners to meet with him to discuss the amount of tomato products to pack that season. The tomato crop, which had been purchased at planting, was beginning to arrive at the cannery. Packing operations would have to start by the following Monday because, after this time the fruit would begin to deteriorate. In effect this ruled out the possibility of reselling any part of the crop which, if it remained unpacked, would be worthless. Red Brand was a medium-size company which canned and distributed a variety of fruit and vegetable products under private brand names in the western states. William Cooper, Controller, and Charles Myers, Sales Manager, were the first to arrive in Mr. Gordon’s office. Dan Tucker, Production Manager, came in a few minutes later and said that he ha d picked up Produce Inspection’s latest estimate of the quality of the incoming tomatoes. According to the report, about 25 per cent of the 7,000,000 pound crop was Grade ‘A’ and the remaining portion Grade ‘B’. Mr. Gordon asked Mr. Myers about the demand for tomato products for the coming year. Mr. Myers replied that they could sell all of the whole canned tomatoes Type A and Type B they could produce. The expected demand for tomato juice and tomato paste, however, was limited. The Sales Manager then passed around the latest demand forecast (Exhibit 1) reminding the group that selling prices had been set in light of long-term marketing strategy of the company, and that potential sales had been forecast at these prices. After looking at Mr. Myer’s estimates of demand, Mr. Cooper said that it looked as though the company “should do quite well (on the tomato crop) this year”. With the new accounting system that had been set up, he had been able to compute the contribution for each product, and according to his analysis the
On Monday, November 15th, 2004, Mitchell Gordon, Vice-President of Operations, asked the Controller, the Sales Manager, and the Production Manager of Red Brand Canners to meet with him to discuss the amount of tomato products to pack that season. The tomato crop, which had been purchased at planting, was beginning to arrive at the cannery. Packing operations would have to start by the following Monday because, after this time the fruit would begin to deteriorate. In effect this ruled out the possibility of reselling any part of the crop which, if it remained unpacked, would be worthless. Red Brand was a medium-size company which canned and distributed a variety of fruit and vegetable products under private brand names in the western states. William Cooper, Controller, and Charles Myers, Sales Manager, were the first to arrive in Mr. Gordon’s office. Dan Tucker, Production Manager, came in a few minutes later and said that he ha d picked up Produce Inspection’s latest estimate of the quality of the incoming tomatoes. According to the report, about 25 per cent of the 7,000,000 pound crop was Grade ‘A’ and the remaining portion Grade ‘B’. Mr. Gordon asked Mr. Myers about the demand for tomato products for the coming year. Mr. Myers replied that they could sell all of the whole canned tomatoes Type A and Type B they could produce. The expected demand for tomato juice and tomato paste, however, was limited. The Sales Manager then passed around the latest demand forecast (Exhibit 1) reminding the group that selling prices had been set in light of long-term marketing strategy of the company, and that potential sales had been forecast at these prices. After looking at Mr. Myer’s estimates of demand, Mr. Cooper said that it looked as though the company “should do quite well (on the tomato crop) this year”. With the new accounting system that had been set up, he had been able to compute the contribution for each product, and according to his analysis the