Seart Paan 065138 product 1D2E2TENPIL pageietleef4550cmocy 1662929318183540710 Case x + 8 Yahoo Ehao123 Bing Yahoo imported From Sa.. Skuex S SS Summary: Managing Capacity N ME Case Study Forster's Market Introduction Forster's Market is a retailer 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 better. 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. AOOWPX03 IND MES 48 99% MET $ Forst M ACCA CS M Conex hos G Seart x marson.com courses/065128/products/TOZEZTENPIDOS178.900 lbde 170707456672680 Mocale=1062629318184640720 S Yahoo > hac123 Bing Yahoo De Imported From Sex > SBER Ca Summary: Managing Capacity 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 outlined three possible demand scenarios: Low demand 18,000 pounds per year Medium demand 25,000 pounds per year High demand 35,000 pounds per year These numbers include the 14,400 pounds sold at Forster's Market. In addition, Robbie thinks all three scenarios are equally likely. Questions 1. What are the two capacity options that Robbie needs to consider? What are their fixed and variable costs? What is the indifference point for the two options? What are the implications of the indifference point? Managing Capacity These numbers include the 14,400 pounds sold at Forster's Market. In addition, Robbie thinks all three scenarios are equally likely. Questions 1. What are the two capacity options that Robbie needs to consider? What are their fixed and variable costs? What is the indifference point for the two options? What are the implications of the indifference point? 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 derhand scenarios outlined above? Why or why not? 3. Calculate the expected value for the two capacity options. Keep in mind that, for the roaster option, any demand above 14,400 pounds will generate revenues of only $2.90 a pound. Update the decision tree to show your results. 4. What is the worst possible financial outcome for Forster's? The best possible financial outcome? What other factors-core competency, strategic flexibility, etc.-should Robbie consider when making this decision? he OWPXOM Seart Paan 065138 product 1D2E2TENPIL pageietleef4550cmocy 1662929318183540710 Case x + 8 Yahoo Ehao123 Bing Yahoo imported From Sa.. Skuex S SS Summary: Managing Capacity N ME Case Study Forster's Market Introduction Forster's Market is a retailer 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 better. 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. AOOWPX03 IND MES 48 99% MET $ Forst M ACCA CS M Conex hos G Seart x marson.com courses/065128/products/TOZEZTENPIDOS178.900 lbde 170707456672680 Mocale=1062629318184640720 S Yahoo > hac123 Bing Yahoo De Imported From Sex > SBER Ca Summary: Managing Capacity 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 outlined three possible demand scenarios: Low demand 18,000 pounds per year Medium demand 25,000 pounds per year High demand 35,000 pounds per year These numbers include the 14,400 pounds sold at Forster's Market. In addition, Robbie thinks all three scenarios are equally likely. Questions 1. What are the two capacity options that Robbie needs to consider? What are their fixed and variable costs? What is the indifference point for the two options? What are the implications of the indifference point? Managing Capacity These numbers include the 14,400 pounds sold at Forster's Market. In addition, Robbie thinks all three scenarios are equally likely. Questions 1. What are the two capacity options that Robbie needs to consider? What are their fixed and variable costs? What is the indifference point for the two options? What are the implications of the indifference point? 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 derhand scenarios outlined above? Why or why not? 3. Calculate the expected value for the two capacity options. Keep in mind that, for the roaster option, any demand above 14,400 pounds will generate revenues of only $2.90 a pound. Update the decision tree to show your results. 4. What is the worst possible financial outcome for Forster's? The best possible financial outcome? What other factors-core competency, strategic flexibility, etc.-should Robbie consider when making this decision? he OWPXOM