Next, ignoring the Sedona Stout information, consider David s question regarding what product line the sales people
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Question:
Next, ignoring the Sedona Stout information, consider Davids question regarding what product line the sales people should emphasize. David wants their sales efforts to maximize profits and utilize the company's current capacity. What would you tell him? Explain your rationale.
Focus on what?
To maximize the profit, which product does the sale people should emphasize?
The most popular one?
Highest revenue one?
Highest CM one?
Choose the highest CM per constraint
Focus on what?
Question
Maximize profits and utlize company's current capactiy
Saguaro Pale Ale
Bisbee Bock
Ocotillo Amber Pilsner
Sedona Stout
CM per case
$
$
$
$
Constratint MH
Number of MH per case
CM per MH
Focus on what?
We need to consider these factors:
Does AMI have enough refrigeration space to store
Pilsner?
Does AMI have the ability to finance the additional
inventory levels that would be required to hold the
Pilsner in inventory for the aging process?
What is the market demand for each label?
What are the market competitors for each of the
products?
Is brand reputation the same for the products or is
there some differentiation?
Question
Analyzing the sales forecast of root beer, what preliminary course of action do you recommend inhouse or outsource production and why? Support your recommendation with numbers.
Make or Buy
Question
Number of cases
Make
Buy
Make
Buy
Make
Buy
Sales
Total variable costs
Contribution margin
Total fixed costs
Net operating income
$
$
$
$
$
$
$ $
$ $
$ $
Contribution margin ratio
Breakeven
Operating leverage
Point of indifference
X X
X
X
Cases
$ $ $ $ $ $
$
Make or Buy
Make
Revenue
Costs
$ $ $ $ $ $
$
Make or Buy
Buy
Revenue
Costs
Question
What other issues, concerns, or further analysis do you want to discuss with David? Your issuesconcerns could pertain to whether AMI should add root beer as a new product line and, if so the issues or concerns of producing inhouse versus outsourcing. The issuesconcerns should include both numeric and nonnumeric issues. Do not just bullet point all kinds of items; instead, talk about specifics and how they relate to this companysituation and why they are important to consider.
Any other issues?
Adding root beer as a new product line:
Market understanding
Does AMI fully understand the needs, desires, and buying
habits of the root beer customer?
Does AMI brand name help sell root beer?
Additional fixed cost
Distribution channel
Would this require a whole new distribution channel?
Additional sales staff?
Equipment reliability
Human resource implications
Management Focus
Other opportunities
Related Book For
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr
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