Capacity A growing specialty food manufacturer, Upstate Vegan, specializing in vegan foods, is evaluating the leasing of a new production space in order to cover increased demand for their line of cookies, The company has outgrown their existing leased facility and will rely upon the new space for 100% of their production capacity as of the beginning of the new year. After much research, the company has narrowed their choices to the following facilities: Albany – Featuring a capacity of 15,000 boxes per month, this vegan – dedicated facility requires a 3 – year commitment. Albany also requires a minimum of 10,000 boxes per month. Rochester – The smallest of the locations, with a capacity of 12,000 boxes per month. Rochester is eager to earn Upstate Vegan’s business and offers them greater flexibility with their leasing. They will allow Upstate Vegan the ability to sign 1 – year contracts, allowing the company to have the option to renew annually for a 3 – year period. Rochester has also elected to waive any per month minimum order size. Like Albany, this facility is dedicated to producing only vegan foods. Buffalo – Buffalo features a production capacity of 25,000 boxes per month and requires a minimum order of 8,000 boxes per month and 3 – year commitment. Buffalo further agrees to waive the minimum order requirement during the first year of the contract. However, Upstate Vegan is concerned that using the Buffalo facilities will have a negative effect on the sales because Buffalo uses equipment shared with non-vegan food manufacturers.Growth Projections Upstate Vegan is currently producing both Sugar cookies and Ginger cookies. Based on current projections, Upstate Vegan has determined that each of the two products is expected to finish the year with a sales rate of 4,000 boxes per month. Upstate Vegan forecasts an annualized growth rate of 25%-30% for each of their lines over the next three years. For example, based on the optimistic projections, each line would have sales of 6,000 boxes per month during the first year in the new manufacturing facility. Enticed by the large capacity and low production cost offered by the Buffalo facility, Upstate Vegan has done extensive research and is confident that manufacturing their product on shared equipment would cut demand in half.New Product Lines Upstate Vegan is considering adding two new lines of cookies: Chocolates and Oatmeal Raisin. Market research has determined that each of the two lines would generate sales of 2,000 boxes per month in the first year of introduction, doubling to 4,000 boxes per month in the second year, and finally climbing to 6,000 boxes per month in the third year. Source: 800 score

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A growing specialty food manufacturer, Upstate Vegan, specializing in

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Sayan597

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18 Apr 2025, 09:43

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Hi Apt0810,

As per the statement the demand would be half if the cookies are getting produced in Buffalo. So, in Q2A, I agree the count for second year, but it will be 10000/2 = 5000 < 8000 (Min no. of boxes applied from Y2 of production), which is clearly violating the condition. Please do let me know if I'm getting anything wrong.

Apt0810

1)a)No,since in the first year itself the projection for each line is 6000 boxes per month so total sales for two existing units (with no new addition) =12000 boxes but capacity of Rochester is 12k boxes,so in 2nd year according to projected sales ,the sales will increase by 25% ,so total boxes to be produced would be >12k ,which won't be feasible for Rochester
b)Yes,since Buffalo has a total capacity of 25k boxes per month so for the current value of production =6k*2 =12k boxes for existing units +2000 boxes *2 for new units = 16k for first year , In second year= 12k*1.25 +4000*2 boxes for new lines=23k,so fine and for 3rd year =15k*1.25 +6000*2=30750k..But all these values will be halved since in Buffalo the resource sharing is there so demand is already halved.
c)No,,For Albany first year total =6000*2=12k boxes
Second year = 12k*1.25+2000 boxes of oatmeal(since this is the first year of its introduction) = 17k boxes

2)a) Yes, Buffalo for second year with pessimistic growth and no new introduction= 4000*2= 8k boxes - For first year
8k*1.25= 10000 boxes - For second year
all of which are <25k
b) Yes, Rochester for 1st year with pessimistic growth and no new introductions=
4000*2 =8k boxes for first year< 12k boxes capacity of Rochester
c)Yes,Albany for first year with pessimistic growth and introduction of chocolate cookies=
4000*2=8k boxes +2k boxes of chocolate cookies=10k boxes <15k box capacity of Albany

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cheshire

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28 Aug 2025, 12:07

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For the second year it would be 23k/2 because they have the original 2 lines which increase 1.25x from 12000 + the 2 new lines: 4000*2 meaning the second year is 3.5k over the threshold. If you could explain where you got 10k/2 from I could better understand your solving process and solution.

Sayan597