Question: Please answer questions for the case study with explanations, for a better understanding of this subject. thank you! Case Study Forster's Market Introduction Forster's Market
Please answer questions for the case study with explanations, for a better understanding of this subject. thank you!
Case Study Forster's Market Introduction Forster's Market is a retaler of specialty food items, including premium coffees, imported crackers and cheeses, and the like. Last year, Forster's sold 14,400 pounds of coffee. Forster's pays a local supplier $3 per pound and then sells the coffees for $7 a pound. The Roaster Decision While Forster's makes a handsome profit on the coffee business, owner Robbie Forster thinks he can do beiter. Specifically, Robbie is considering investing in a large industrial-sized coffee roaster that can roast up to 40,000 pounds per year. By roasting the coffee himself, Robbie will be able to cut his coffee costs to $1.60 a pound. The drawback is that the roaster will be quite expensive; fixed costs (including the lease, power, training, and additional labor) will run about $35,000 every year. The roaster capacity will also be significantly more than the 14,400 pounds that Forster's needs. However, Robbie thinks he will be able to sell coffee to area restaurants and coffee shops for $2.90 a pound. Robbie has outined three possible demand scenarios: These numbers include the 14,400 pounds sold at Forster's Market. In addition, Robbie thinks all three scenarios are equally likely. Questions 2. Draw the decision tree for the roaster decision. If Forster's does not invest in the roaster, does Robbie need to worry about the different demand scenarios out ined above? Why or why not
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