Jay-Me Radish has the following annual activity and costs: Sales [unit is box of 12 1-lb cello bags. of radishes] 4,200,000 units Average selling price per box $3.00 Yield per planted acre 375 net units Variable Costs: Farming costs: Seed $91.00 per acre Fertilizer & Chemical $70.00 per acre Fixed Costs $2,400,000 Packaging Costs: Grading labor $0.23 per box Box & cellophane cost $0.22 per box Waste [cull removal] $0.03 per box Fixed Costs $2,200,000 Selling & Administrative: Commission $0.05 per box Delivery $0.30 per box Fixed Costs $1,500,000.00 Decisions to make: 1. The company does not assess any costs to its farmland, which it has owned for over 20 years. It has the opportunity to sell its 2,400 acres of black muck farmland for $5,700.00 per acre. This would allow the company to pay off nearly all of its $14,000,000.00 bank debt, which has an interest rate of 6%. Bolthome Farms is a large carrot grower; it has offered the to farm radishes on its land by rotating with Bolthomes carrots. Jay-Me will pay $200.00 to Bolthome for each planted acre of radishes. This rotation would permit a 10% increase in net yield as well as a 50% decrease in fertilizer and chemical cost (see other factors below). 2. 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 80%. The machines cost $1,750,000.00 each and are projected to have a five-year life. Similar machines have been on the market for nearly a decade grading and sorting potato chips.

3. The company is considering the purchase of 60 hydrocooler trailers. These trailers would sell for $35,000 each. Each trailer would cost approximately $350.00 per month to operate (primarily utility costs). This hydrocooling storage increases the life of the radishes by 28 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 three-week period during which time the company basically has no radishes to sell. The radish price soars to an average price of $6.50 per box for three weeks following each such disaster. These six weeks of new sales, estimated at 65,000 per week, would all constitute increased sales. However, to make this work, the company would need to increase planted acres by 30%. Additionally, the company would incur additional waste removal costs of $0.05 per box.

Other factors / information: The Companys position with the bank is precarious at best. It is in the second year of a three-year restructured agreement. The bank is secured by all of the Companys assets, and the banks president, with whom Jay-Me 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 27-to-32 day crop. As such, normal farming procedures would allow six to seven crop rotations on each acre. Therefore, Jay-Me is farming over 11,000 acres of radishes on its 2,400 acres due to multiple crops per year. Also, understand that a weather disaster creates a 21-day void in harvesting because of the technical damage to plant-cycle 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.