#7 Due to the increase in Micro Breweries, the cascade hops that go into our Pal

ID: 2561629 • Letter: #

Question

#7 Due to the increase in Micro Breweries, the cascade hops that go into our Pale Ale and IPA are on back order. We currently have a back order for 70 cases of pale ale and 50 cases of IPA . The pale ale sells for $25 a case with variable costs of $18 per case and the IPA sells for $30 per case with variable costs of $20 per case. The Pale Ale requires 2 OZ of Cascade hops while the IPA requires 6 OZ of hopes. The brewery currently only has 350 ounces of cascade hops on hand. How many cases of each product should the brewery make? (CONSTRAINED RESOURCES)

One case of Pale Ale per unit Selling price $25 current volume 26,000 cases (24 beers in a case) malts $2.60 hops $2.40 yeast $0.50 packaging $5.00 *other production costs $4.50 *5 gallons of water for every gallon of beer, CO2, utilities, taxes shipping $1.75 selling $1.25 total variable costs $18.00 total fixed up to 28,000 capacity Salary brewer $1.15 $30,000.00 Salalry driver $0.77 $20,000.00 rent $1.92 $50,000.00 truck $0.92 $24,000.00 promotion exp $0.19 $5,000.00 total costs $22.96

Explanation / Answer

From the table and calculations below we can see that the brewery should make 70 Cases of Pale Ale & 35 Cases of IPA.

Pale Ale

IPA

Selling Price

$25

$30

Variable Cost

$18

$20

$10

Required OZ of Cascade Hops

CM/OZ

$3.5

$1.67

Back log

Total CM Available

350

Make

70 Cases (140oz Cascade Hops)

35 Cases (210oz Cascade Hops)

Total CM

(70*7)=490

(35*10)=350