A growing specialty food manufacturer, Upstate Vegan, specializing in

Question

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

Apt0810 · Answer

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

Posted from my mobile device

unraveled · Answer

You have done a great job.

Little query: In 1C the minimum 10K has to be considered and then a growth projection of 1.25times is considered for 2nd year. Over that 2000 items per month for Oatmeal is considered. So, 12500 + 2000 = 14500 items per month. Comments..!!

Apt0810 · Answer

Hey why do you want to take 10k because that's the minimum monthly value for Albany,but in the question ,it is all about the optimistic growth projection

mSKR · Answer

Question1

Assuming the most optimistic growth projections= 30%

A. Rochester (2nd year in the facility) – Assuming the most optimistic growth projections and no new product introductions.
>> 6,000 boxes per month during the first year with optimistic projections | after growth = 6000*130%= 7800 each line( 2nd year)
2 products = Sugar cookies+ Ginger cookies
So total capacity needed= 7800*2= 15600 
Rochester: The smallest of the locations, with a capacity of 12,000 boxes per month.

NOT SUFFICIENT

B. Buffalo (3rd year in the facility) – Assuming the most optimistic growth projections and immediate introduction of both new products.
>>6,000 boxes per month during the first year | after growth = 6000*130% (2nd year)= 7800 *130% (3rd year) = each line(~10000) 
Total = ~20000 
+ Introduction of new products = 6000*2( 2 products) = 12000
Total capacity in 3rd year = 32000~
Buffalo features a production capacity of 25,000 boxes per month and manufacturing their product on shared equipment would cut demand in half. 
So capacity reduced to 16000

SUFFICIENT

C. Albany (2nd year in the facility) – Assuming the most optimistic growth projections and the introduction of Oatmeal Raisin cookies in the second year.
>> based on the optimistic projections,-6,000 boxes per month during the first year
2 products = Sugar cookies + Ginger cookies
So total capacity needed= 6000*2*1.3= 12000 *1.3= 15600
+ Introduction of Oatmeal Raisin = 2000 
Total capacity = 176000
Albany – Featuring a capacity of 15,000 boxes per month

NOT SUFFICIENT

Question2:
A. Buffalo (2nd year in the facility) – Assuming the most pessimistic growth projections and no new product introductions.
>> pessimistic growth = 4000boxes per month
25% growth makes it 5000 boxes per moth ( 2nd year)
Total capacity needed for 2 products = 10000 boxes per month in 2nd year
Buffalo features a production capacity of 25,000 boxes per month and requires a minimum order of 8,000 boxes per month and Buffalo further agrees to waive the minimum order requirement during the first year of the contract

YES

B. Rochester (1st year in the facility) – Assuming the most pessimistic growth projections and no new product introductions.
>> pessimistic growth = 4000boxes per month
Total capacity needed= 8000 boxes per month
Rochester: The smallest of the locations, with a capacity of 12,000 boxes per month and Rochester has also elected to waive any per month minimum order size.

YES

C. Albany (1st year in the facility) – Assuming the most pessimistic growth projections and the immediate introduction of Chocolate cookies.
>> pessimistic growth = 4000boxes per month( 2 products = 8000)
Chocolate cookies: generate sales of 2,000 boxes per month in the first year of introduction
Total capacity = 10000 boxes per month
Albany – Featuring a capacity of 15,000 boxes per month + Albany also requires a minimum of 10,000 boxes per month.

YES

mSKR · Answer

why answer for 1C is YES
C. Albany (2nd year in the facility) – Assuming the most optimistic growth projections and the introduction of Oatmeal Raisin cookies in the second year.

lnm87   SajjadAhmad

please recheck the answer or whats wrong in the explanation above?

unraveled · Answer

You have done it correctly. Your answers are perfectly fine. Kudos..!!
There's a glitch with the question's 1C question - its about most pessimistic growth. Checked it and found that - instead of 
"Albany (2nd year in the facility) – Assuming the most optimistic growth projections and the introduction of Oatmeal Raisin cookies in the second year."
it was 
"Albany (2nd year in the facility) – Assuming the most pessimistic growth projections and the introduction of Oatmeal Raisin cookies in the second year."

Apt0810  I think this answers your question as well.

mSKR · Answer

C. Albany (2nd year in the facility) – Assuming the most PESSIMISTIC growth projections and the introduction of Oatmeal Raisin cookies in the second year.
>> based on the optimistic projections, 4,000 boxes per month during the first year
2 products = Sugar cookies + Ginger cookies
So total capacity needed= 4000*2*1.25= 10000 
+ Introduction of Oatmeal Raisin = 2000
Total capacity = 12000
Albany – Featuring a capacity of 15,000 boxes per month

SUFFICIENT

botNoName · Answer

In the question 2A, shouldn't the demand be reduced to half because of the shared equipment in Buffalo? Please explain the reason if I am wrong.

Thank you!

kop18 · Answer

As per the question stem, buffalo cuts the demand by half. So why are we considering the most pessimistic projection as a whole and not dividing by half?

Aarris · Answer

NoeticImbecile · Answer

Hey! although it won't affect the answer but in 1C, can you please explain why you have added 2000 oatmeal boxes in the second year (as in 1B in Buffalo you added 2000*2 in the first year itself, which to me appears correct) and ignored 2000 boxes of chocolate and more so these should be in the first year itself so second year should be 12000*1.25 + 4000*2 = 23000

Further in S2: when its written that Rochester has also elected to waive any per month minimum order size and the question states whether Upstate Vegan will have enough demand to meet the monthly minimum order for the selected facility, the how come the answer is a Yes
Any expert's comment is welcome!

Fiji2000 · Answer

Bunuel 
In 2nd question, why do we not cut the production by half since we're talking about Buffalo????

SatvikVedala · Answer

Hi  Fiji2000

In the Tab2 (Article 2) it is mentioned that "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. "

Reason being "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"

Fiji2000 · Answer

Exactly, so why did we NOT divide by 2?

In the answers above by  mSKR  , the 2nd question first part. we say 5000 and then multiply with 2 for 2 products. but technically it'll be 5000 for both because it should be cut by half right?

imslogic · Answer

I believe that 2A should be No as realized demand is half of projected demand for Buffalo. There appears to be an error in the solution.

Posted from my mobile device

Sandigaru · Answer

Hello  Sajjad1994   unraveled

Can you explain me why it has not been halved in Question 2A (Buffalo) & also can you explain me what do you mean pessimistic whether it is 25% (the lower one) or staying at the existing level.

Ashmeh · Answer

For Question 2, the demand at Buffalo facility will be reduced to half, i.e. 5000 boxes (10k/2), then how will it fulfil the minimum order requirement? Can anyone please help.

Adi2046 · Answer

But in Q2.1, won't the demand be also reduced by half!!!

hr1212 · Answer

1.For each of the following scenarios, determine if the facility selected will have sufficient capacity to meet the demand for Upstate Vegan’s cookies. Select Yes if, based on the assumptions, the facility will have sufficient capacity. Otherwise, select No.

Rochester (2nd year in the facility) – Assuming the most optimistic growth projections and no new product introductions.

Required capacity = 6000*2*1.3 = 15600 
 Facility capacity = 12000

No

Buffalo (3rd year in the facility) – Assuming the most optimistic growth projections and immediate introduction of both new products.

Required capacity = 6000*2*1.3*1.3 + 6000*2 = 20280 + 12000 = 32280 
Facility capacity = 25000

If we just go via numbers here, it's easy to mark No but read the passage carefully -   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 .

So adjusted required capacity = 16000

Yes

Albany (2nd year in the facility) – Assuming the most optimistic growth projections and the introduction of Oatmeal Raisin cookies in the second year.

Required capacity = 6000*2*1.3 + 4000 = 15600 + 4000 = 19600 
 Facility capacity = 15000

No

2. For each of the following scenarios, determine if Upstate Vegan will have enough demand to meet the monthly minimum order for the selected facility. Select Yes if, based on the assumptions listed, the demand will have sufficient to meet the minimum order. Otherwise, select No

Buffalo (2nd year in the facility) – Assuming the most pessimistic growth projections and no new product introductions.

Required capacity = 6000*2*1.25 = 15000

We know from above that demand would be half for Buffalo so adjusted required capacity = 7500

Minimum facility capacity = 8000

No

If the question asked for 1st year instead of 2nd then according to the passage -  Buffalo further agrees to waive the minimum order requirement during the first year of the contract

Adjusted minimum facility capacity for first year would be 0 and answer would be Yes

Rochester (1st year in the facility) – Assuming the most pessimistic growth projections and no new product introductions.

No need for any calculations here as  Rochester has also elected to waive any per month minimum order size.

Yes

Albany (1st year in the facility) – Assuming the most pessimistic growth projections and the immediate introduction of Chocolate cookies.

Required capacity = 6000*2 + 2000 = 14000 
 Minimum facility capacity = 10000

Yes

A growing specialty food manufacturer, Upstate Vegan, specializing in

Prep Toolkit

Top 5 GMAT Debrief Videos

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards