Wilkano Case Update Besides the information in the case write-up, students will have to consider the following new information in their analysis. In 2017, Wilkano had better luck. They were able to recover production from the ineffective training and pruning, plus additional trees came into production. Instead of averaging 818 trees, they were able to bring an average of 898 trees in to production. Their wholesalers and brokers told Wilkano that they could expect company label and private label sales to remain the same as 2016. Wilkano, decided to push all of the excess production into direct production of apple juice. This brought in an additional 213,000 units of juices To sale this additional juice, Wilkano decided to launch the Nepi Orchards brand, which they would directly sell to regional stores selling natural products. By selling direct, Wilkano was able to receive the full wholesale price of S1.10 per unit; however, they had to acquire a delivery truck (amortized at S13,000 per year) and hire a driver ($48,000 per year). They also had to contact and personally sell to the natural product stores. Dena Yazzie and Ruby Woodward split the duty making sales calls. The selling expenses just consisted of a few brochures and charging gas on their corporate credit cards. Wilkano also decided to move forward with the full digital marketing campaign (digital advertising, revising the website, social media, and promotional items. Since the brand would have limited distribution, they scaled-back on the in-store promotions (hang tags and donations) for a total budget of S8,000. This would result in a total marketing budget of S48,000. Exhibit 7 Revised Income Statement 2016 FY 2016 () FY2017 FY 2018 21600002,373,000 2,373,000 $5,228.60$5,466.00 $5,466.00 $1,220,160 $1.454,460 $1437,000 317.520 317520 317520 786,240 76,240 786 240 34 300 98,940 $1,235,380 $1,425,273 $1421,513 627,432 655,920 655 920 388 800 439,005 439 005 5480 71720 48,000 Cost per Acre Revenue Apple Juice- Private Label (648,000 units $0.49 per unit) Apple Juice-Company Label (1,512000 units $0.52 per unit) Apple Juice-Neppi (213,000 units @$1.10 per unit) Direct-to-Consumer (Retail & Farmers Markets) 234,300 116,400 116400 Costs Apple Production (8 $5,228.60 per acre) Apple Juice Production (2,160,000 units@$0.18 per unit)2 Direct-to-Consumer (Retail & Farmers Markets) Marketing Cost Selling Expenses Distribution 61,000 43,668 143,668 143,668 Profit Before Taxes & Subsidies 291 $15,487 Pleased with the results from 2017, Dena decided to continue with the same program through 2018. However, this stretched Dena and Ruby too thin. Dena was unable to oversee farm '89% of the cost of producing apple juice was variable Production cost for 2017 and 2018 were higher, due to the incrcase labeling expense of the new Nepi brand Wilkano Case Update operations and once again the trees were not managed and pruned properly. This minor disaster cut apple production, just like in 2016. Since they had commitments to meet, they took apples from the farmer's market and their own stores to meet juice production targets. Tacki was familiar with the business and was graduating, they felt it was time to hire Tacki full time and make her the lead sales person. They would pay her salary and overhead of $46,000 per year plus a company car to make sales calls (amortized at $5,500 per year). Taki, would also earn a commission of 2% for any new business that she brought-in. As an intern, Tacki's salary expense came to $6600, so this would add a net cost of $44,900 Besides being overloaded, they wanted to hire a full-time sales person for another reason. Having talked directly to customers, both Dena and Ruby discovered that natural food stores and upscale grocery stores wanted organically grown natural juice. To serve this niche market, Wilkano is considering purchasing 25 acres of an orchard across the road. Going organic will reduce the yield per acre, and to keep the trees healthy, they will have to decrease the tree density per acre. The number of trees will drop from 900 to 800. Output will drop by 15%. This would allow them to produce 352,200 units of organic apple juice. To purchase this portion of the orchard, they would have to pay $462,500, amortized over 15 years, this comes to $47,620 per year Natural methods of removing pest are expensive and labor intensive. For example, instead of using fungicides to control fire blight, organic farmers spray the trees with a yeast mixture, unfortunately yeast is water soluble and washes away, this means that every time it rains the yeast has to be resprayed. Maintaining organic tress are also more labor intensive. While Wilkano will not have to spend money on herbicides, fungicides, insecticides, and plant growth chemicals, they will have to spend $1,351 per acre on organic pest controls, and $2,038 on tree maintenance labor. The price for fertilizer increases to S58.30. Harvesting labor, lime, diesel fuel for the tractors, equipment repairs & maintenance, and miscellaneous all cost the same as standard apple production. Crop insurance increases to $448.60 and all these changes drives up the interest on operating capital to $176.10. Prior to producing the organic juice, Wilkano has to thoroughly clean and flush the production equipment, plus use a newly designed label this increases the production cost from S0.18 to S0.195 per unit. On the positive side, 32 oz bottles of organic apple juice sale for S6-to-S10 each retail. Wilkano, believes that it can receive on average $4.27 wholesale distributing the juice to local natural food stores, and on average $2.31 selling through brokers and wholesalers for the non-local stores. Wilkano Orchards Revised Student Spreadsheet 042619 Fle Ean View Insert Format Data Tools Add ona Help Last edit was 7 hours 1c00 230 2373000 Wilkano Orchards Revised Student Spreadsheet 042619 Fle Edit View Insert Format Data Tools Add-ons Help Last edt was 7 hours.ag xApple Orchaed Production Costs per Acre Budget versus Actuol,2016 Apple Orchard Poduction Costs per Acne 2017&20 Apple Owhard Production Costs p e 201 $30.00 S %00 :Organic Pest Control Labor-Harvesting 1600 00 1510 00r-Harveting 32.00$1000 Plant gowth chemicals 350.00 M712 Cmp Insurance Dewel Fuel Equipment Repairs& Maintenance 30000 309.71 quipment Repairs & Maintenance $325 0 14000 3953 Interest on Operating Capital 5325.00Emt Rerpairs& Maintenunce Inberest on Opessting Capilal 575.00 $570.22 Fised Costs Wikano Orchards Revised Student Spreadsheet 042619 File Edit View Insert Format Data Tools Add-ons Help Last edit was 7 hovrs.a 0800 905 te-Mac 0003046 Plant goth dhemkcals 12.00$32.00 Plant growth dhrmicals 156.00 $156 2 201.00 9200.00D ntewst on Operating Capital 200 00200.0 20000 0 Cot of Land Cat of Land NS Wilkano Case Update Besides the information in the case write-up, students will have to consider the following new information in their analysis. In 2017, Wilkano had better luck. They were able to recover production from the ineffective training and pruning, plus additional trees came into production. Instead of averaging 818 trees, they were able to bring an average of 898 trees in to production. Their wholesalers and brokers told Wilkano that they could expect company label and private label sales to remain the same as 2016. Wilkano, decided to push all of the excess production into direct production of apple juice. This brought in an additional 213,000 units of juices To sale this additional juice, Wilkano decided to launch the Nepi Orchards brand, which they would directly sell to regional stores selling natural products. By selling direct, Wilkano was able to receive the full wholesale price of S1.10 per unit; however, they had to acquire a delivery truck (amortized at S13,000 per year) and hire a driver ($48,000 per year). They also had to contact and personally sell to the natural product stores. Dena Yazzie and Ruby Woodward split the duty making sales calls. The selling expenses just consisted of a few brochures and charging gas on their corporate credit cards. Wilkano also decided to move forward with the full digital marketing campaign (digital advertising, revising the website, social media, and promotional items. Since the brand would have limited distribution, they scaled-back on the in-store promotions (hang tags and donations) for a total budget of S8,000. This would result in a total marketing budget of S48,000. Exhibit 7 Revised Income Statement 2016 FY 2016 () FY2017 FY 2018 21600002,373,000 2,373,000 $5,228.60$5,466.00 $5,466.00 $1,220,160 $1.454,460 $1437,000 317.520 317520 317520 786,240 76,240 786 240 34 300 98,940 $1,235,380 $1,425,273 $1421,513 627,432 655,920 655 920 388 800 439,005 439 005 5480 71720 48,000 Cost per Acre Revenue Apple Juice- Private Label (648,000 units $0.49 per unit) Apple Juice-Company Label (1,512000 units $0.52 per unit) Apple Juice-Neppi (213,000 units @$1.10 per unit) Direct-to-Consumer (Retail & Farmers Markets) 234,300 116,400 116400 Costs Apple Production (8 $5,228.60 per acre) Apple Juice Production (2,160,000 units@$0.18 per unit)2 Direct-to-Consumer (Retail & Farmers Markets) Marketing Cost Selling Expenses Distribution 61,000 43,668 143,668 143,668 Profit Before Taxes & Subsidies 291 $15,487 Pleased with the results from 2017, Dena decided to continue with the same program through 2018. However, this stretched Dena and Ruby too thin. Dena was unable to oversee farm '89% of the cost of producing apple juice was variable Production cost for 2017 and 2018 were higher, due to the incrcase labeling expense of the new Nepi brand Wilkano Case Update operations and once again the trees were not managed and pruned properly. This minor disaster cut apple production, just like in 2016. Since they had commitments to meet, they took apples from the farmer's market and their own stores to meet juice production targets. Tacki was familiar with the business and was graduating, they felt it was time to hire Tacki full time and make her the lead sales person. They would pay her salary and overhead of $46,000 per year plus a company car to make sales calls (amortized at $5,500 per year). Taki, would also earn a commission of 2% for any new business that she brought-in. As an intern, Tacki's salary expense came to $6600, so this would add a net cost of $44,900 Besides being overloaded, they wanted to hire a full-time sales person for another reason. Having talked directly to customers, both Dena and Ruby discovered that natural food stores and upscale grocery stores wanted organically grown natural juice. To serve this niche market, Wilkano is considering purchasing 25 acres of an orchard across the road. Going organic will reduce the yield per acre, and to keep the trees healthy, they will have to decrease the tree density per acre. The number of trees will drop from 900 to 800. Output will drop by 15%. This would allow them to produce 352,200 units of organic apple juice. To purchase this portion of the orchard, they would have to pay $462,500, amortized over 15 years, this comes to $47,620 per year Natural methods of removing pest are expensive and labor intensive. For example, instead of using fungicides to control fire blight, organic farmers spray the trees with a yeast mixture, unfortunately yeast is water soluble and washes away, this means that every time it rains the yeast has to be resprayed. Maintaining organic tress are also more labor intensive. While Wilkano will not have to spend money on herbicides, fungicides, insecticides, and plant growth chemicals, they will have to spend $1,351 per acre on organic pest controls, and $2,038 on tree maintenance labor. The price for fertilizer increases to S58.30. Harvesting labor, lime, diesel fuel for the tractors, equipment repairs & maintenance, and miscellaneous all cost the same as standard apple production. Crop insurance increases to $448.60 and all these changes drives up the interest on operating capital to $176.10. Prior to producing the organic juice, Wilkano has to thoroughly clean and flush the production equipment, plus use a newly designed label this increases the production cost from S0.18 to S0.195 per unit. On the positive side, 32 oz bottles of organic apple juice sale for S6-to-S10 each retail. Wilkano, believes that it can receive on average $4.27 wholesale distributing the juice to local natural food stores, and on average $2.31 selling through brokers and wholesalers for the non-local stores. Wilkano Orchards Revised Student Spreadsheet 042619 Fle Ean View Insert Format Data Tools Add ona Help Last edit was 7 hours 1c00 230 2373000 Wilkano Orchards Revised Student Spreadsheet 042619 Fle Edit View Insert Format Data Tools Add-ons Help Last edt was 7 hours.ag xApple Orchaed Production Costs per Acre Budget versus Actuol,2016 Apple Orchard Poduction Costs per Acne 2017&20 Apple Owhard Production Costs p e 201 $30.00 S %00 :Organic Pest Control Labor-Harvesting 1600 00 1510 00r-Harveting 32.00$1000 Plant gowth chemicals 350.00 M712 Cmp Insurance Dewel Fuel Equipment Repairs& Maintenance 30000 309.71 quipment Repairs & Maintenance $325 0 14000 3953 Interest on Operating Capital 5325.00Emt Rerpairs& Maintenunce Inberest on Opessting Capilal 575.00 $570.22 Fised Costs Wikano Orchards Revised Student Spreadsheet 042619 File Edit View Insert Format Data Tools Add-ons Help Last edit was 7 hovrs.a 0800 905 te-Mac 0003046 Plant goth dhemkcals 12.00$32.00 Plant growth dhrmicals 156.00 $156 2 201.00 9200.00D ntewst on Operating Capital 200 00200.0 20000 0 Cot of Land Cat of Land NS