Grow Green Program PDF

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The answer of the case Grow Green Program ...

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GROW GREEN PROGRAM 1. Watch the Try Recycling website video about the company: http://bit.ly/JTCXmG. 2. Considering the market trends, corporate capabilities and potential customers, is the time right for a venture like the Grow Green Program? This seems to be the right moment to start the Grow Green program because the following reasons: a. There is a big amount of material to be recycled, since 90% of the population in London, Ontario, participate the recycling their waste. b. Try has the capability to recycle 90% of the material they collect from the community. c. Different sectors of the community have been gaining awareness of the importance of recycling waste. For instance, some years ago the some organizations of the private, public and social sectors got together in a program called London Compost. d. The last year, Try has been increasing its market to retail sales. In one year, this sector already represents 5% of Try´s total sales. e. Fundraising infrastructure is in place in the community. Several organizations have been participating in fundraising activities.

3.

Calculate the contribution margin rate for each product for Try. Calculate the contribution margin rate for each product for the participating organizations.

Product

Contribution margin rate for Try Contribution margin rate for participating (Wholesale Selling Price*100/Variable organizations Cost-100) (Retail Selling Price*100/Wholesale Selling Price-100)

Compost

18%

38%

Landscape Mulch 150%

25%

Two-Way Topsoil

41%

58%

Tri-Mix Topsoil

44%

29%

Landscape Woodchips

50%

19%

4. Calculate the weighted average contribution margin rate for all five products for Try and for participating organizations. Unit contribution margin: wholesale selling price-variable cost Weighted average contribution margin rate: (unit contribution margin product A x Sales mix A) + (unit contribution margin product B x Sales mix B) + … from http://www.answers.com/topic/weighted-averagecontribution-margin?cat=biz-fin

(2*0.10)+(6*0.05)+(3.5*0.40)+(5.25*0.10)+(9*0.35)= $5.57

5. Using Try’s weighted average contribution rate, determine: (a) breakeven sales per participating organization, and (b) target profit breakeven sales per participating organization for 1, 10 and 25 organizations. a. Break-even sales per participating organization. In the case study there is no data about the fix costs, except for the $500 dollars Graham will spend in advertising material per participating organization. Each organization will have to sell 89.7 units in order to recover the $500 Graham invested (500/5.57) b. Target profit break-even sales per participating organization for one, five, 10, and 25 organizations? The target profit that Graham set is of $35,000 dollars. In order to get this calculation we need to divide target profit/weighted average contribution. 35,000/5.57= 6283.6 units need to be sold in order to gain the target profit. For one organization: 6283.6 + 89.7 (break-even sales)= 6,373 units For 5 organizations: 6283.6 + (89.7*5)=6,732.1 total units. 6,732.1/5=1346.4 units per organization For 10 organizations: 6283.6 + (89.7*10)=7,181.1 total units. 7,181.1/10=718.1 units per organization For 25 organizations: 6283.6 + (89.7*25)=8,526.1 total units. 8,526.1/25=341 units per organization

6. How many customers are needed to meet target profit breakeven sales for 1, 10, and 25 organizations? According to Graham, an average user of gardening supplies purchase six yards or units of product (“between five and seven” pg 5). We just need to calculate Units per Oganization/6 units= costumers For one organization: 6373/6= 1,062.1 costumers For five organizations: 1346.4/6= 224.4 costumers per organization. 1122 total costumers For ten organizations: 718.1/6= 119.7 costumers per organization. 1197 total costumers For 25 organizations: 341/6= 56.8 costumers per organization. 1420 total costumers

7. As Jim Graham, what would you do? It is easier for 25 organizations to find 57 costumers than for one organization to find 1,062. However, Try would have to produce and distribute much more product while gaining the same profit if 25 organizations participate instead of only one. A middle point sounds reasonable. Five or ten organizations sound more suitable; it all depends in the kind of organizations he can work with. If the organizations can reach out a big number of costumers (if it is a big school for example), working with 5 seems easier for Try because that reduces the amount of product and delivery. If the ability to reach costumers is rather smaller, working with ten organizations seems better....