Analysis of Noccio Chocolate Company: Determination of Revenue, Cost, Product Mix and Constraints

Executive summary
The main founders of Noccio Chocolate Company (NCC) are Jaan and Ting who were former
students of the University of New South Wales (UNSW) student, with the key drive and mission
of blending Chocolate, moreover to mix and fill machine. At the present moment production
analysis done showed that more than 30, 000 kg of the products were produced yearly, the
achievement has resulted from production of quality product at a moderate price.
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Contents
Executive summary.....................................................................................................................................1
Introduction.................................................................................................................................................3
Determination of total revenue...................................................................................................................4
Determination of total cost.........................................................................................................................5
Optimum product mix.................................................................................................................................6
Determination of net profit based on product mix.....................................................................................7
Determination of the constraints................................................................................................................9
Solution to Ting`s questions......................................................................................................................10
Number of boxes produced for each product.........................................................................................10
Cost of wasted cocoa powder................................................................................................................11
Comparison between the current strategy of a fixed volume agreement and variable volume agreement.
...............................................................................................................................................................12
Decision on negotiating a different pricing model.................................................................................13
Decision on additional 800 kg of Grade A powder with similar cost as the initial................................14
Sensitivity of preferred product mix......................................................................................................15
Results.......................................................................................................................................................16
Decision Table:......................................................................................................................................16
Conclusion.................................................................................................................................................17
Recommendation......................................................................................................................................18
Reference...................................................................................................................................................19
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Introduction
The company departments heads carried out analysis on their respective areas in order to come
out with proper and effective results of enhancing production in the company.
Firstly, Jaan a production manager conducted a random sampling as a part of the consignment
whose aims was to determine the quality of beans. The estimation was about 20% of the
consignment which was Grade “A” that is regarded as the best available, what remained was
Grade “B”. The agreed delivered price to the factory is $ 18,000 per tonne of powder. However,
the standard used by Jaan were personal hence it could have never been documented rating
system, moreover, there was on the relationship between Jaan’s rating and the agreed purchase
price per tonne.
Secondly, Ian the sale manager of Noccio determined all the premium bars that Noccio could
have managed to produce. This premium bar was manufactured from the finest powder and
ingredients, essentially, other two products had a limitation on markets..
Finally, Mal finance head prepared a pro-form statement about profit. Where calculation of profit
contribution of each product was done, on its analysis he noted that the chocolate sauce product
hard to make losses that year.
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Determination of total revenue
The total revenue is determined by multiplying the sales volume in box in the optimum product mix
table by their respective sales revenue in sales cost per unit table.
Optimum Product Mix:
Particulars
Premium
Bars
Chocolate
Sauce
Dark
Couverture
Total
Consumption
Maximum Demand 37777 50000 80000
Sales Volume (in box) 37777 0 80000
Cocoa Powder (kgs/Box) 0.18 0.2 0.25
Total Cocoa Powder Required 6799.86 0 20000 26799.86
Sales & Cost Details per Unit:
Particulars
Premium
Bars
Chocolate
Sauce
Dark
Couverture
Sales Revenue $12 $14 $11
Particulars
Premium
Bars
Chocolate
Sauce
Dark
Couverture TOTAL
Total Sales Revenue $453,324 $0 $912,000 $1,365,324
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