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Jay - Me Radish has the following annual activity and costs: Sales [ unit is box of 1 2 1 - lb cello bags. of
JayMe Radish has the following annual activity and costs:
Sales unit is box of lb cello bags. of radishes units
Average selling price per box$
Yield per planted acre net units
Variable Costs:
Farming costs:
Seed$ per acre
Fertilizer & Chemical$ per acre
Fixed Costs$
Packaging Costs:
Grading labor$ per box
Box & cellophane cost$ per box
Waste cull removal$ per box
Fixed Costs$
Selling & Administrative:
Commission$ per box
Delivery$ per box
Fixed Costs$
Decisions to make:
The company does not assess any costs to its farmland, which it has owned for over years. It has the opportunity to sell its acres of black muck farmland for $ per acre. This would allow the company to pay off nearly all of its $ bank debt, which has an interest rate of Bolthome Farms is a large carrot grower; it has offered the to farm radishes on its land by rotating with Bolthomes carrots. JayMe will pay $ to Bolthome for each planted acre of radishes. This rotation would permit a increase in net yield as well as a decrease in fertilizer and chemical cost see other factors below
A Silicon Valley company, Shyster Imaging, has offered to sell the company two laser grading machines which Shyster estimates will reduce the companys grading labor by The machines cost $ each and are projected to have a fiveyear life. Similar machines have been on the market for nearly a decade grading and sorting potato chips.
The company is considering the purchase of hydrocooler trailers. These trailers would sell for $ each. Each trailer would cost approximately $ per month to operate primarily utility costs This hydrocooling storage increases the life of the radishes by days. The anticipated useful life of the trailers is ten years. The trailers would permit the company to have radishes during the estimated two extreme weather disasters freeze or tropical storm per year that substantially damages the crop. Each disaster causes a threeweek period during which time the company basically has no radishes to sell. The radish price soars to an average price of $ per box for three weeks following each such disaster. These six weeks of new sales, estimated at per week, would all constitute increased sales. However, to make this work, the company would need to increase planted acres by Additionally, the company would incur additional waste removal costs of $ per box.
Other factors information:
The Companys position with the bank is precarious at best. It is in the second year of a threeyear restructured agreement. The bank is secured by all of the Companys assets, and the banks president, with whom JayMe has a very good relationship, has just resigned.
The Companys farm equipment is old, with an average age of its tractors being over thirteen years.
The Company is having problems with rhizoctonia due to less than perfect rotation. Yields are consistently going down; but it cannot reduce plantings and meet its budget.
Radishes are a to day crop. As such, normal farming procedures would allow six to seven crop rotations on each acre. Therefore, JayMe is farming over acres of radishes on its acres due to multiple crops per year. Also, understand that a weather disaster creates a day void in harvesting because of the technical damage to plantcycle radish growth.
Instructions:
Prepare comparative forecasted Contribution Margin income statements, independently, for each of the three opportunities See attached answer sheet
Explain how your amounts in the Change columns were derived.
Explain your decision on each of the three options. Discuss the risks, if applicable, as well as the quantitative analysis.
please post the answer, not just explanations.
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