2012

Amore Frozen Foods Case

Statistical Analysis

Submitted to Professor Ashok Chaudhri Professor QAM Indian Institute of Management Lucknow

Submitted By Avneet Kaur (wmp7087) Dipyaman Paul (wmp7093) Dibyendu Dhara (wmp7092) Moitrayee Majumdar (wmp7104) Nitin Tonk (wmp7105) Nupur Mittal (wmp7106)

IIM Lucknow, Noida Campus

2/16/2012

Letter of Transmittal TO:

Ashok Chaudhri, Professor QAM Indian Institute of Management Lucknow FROM: Avneet Kaur, Dipyaman Paul, Dibyendu Dhara, Moitrayee Majumdar, Nitin Tonk, and Nupur Mittal Indian Institute of Management Lucknow Noida Campus DATE: SUBJECT: February 18, 2012 Amore Frozen Foods Case Statistical Analysis

Presented here is the report and analysis on Amore Frozen Foods as part of the QAM assignment. The critical statistical analysis to determine the optimum fill target for Amores frozen cheese and macaroni pie has also been outlined in this report. This analysis has been done from the point of view of profit maximization of Amore. Based on the analysis and findings in this report, it has been found that Amore can satisfy lower fill targets and yet satisfy the accepted industry standards. This in turn would ensure that Amore can further maximise its profits. The detailed statistical and profit analysis have been provided separately. Please refer to the spreadsheet at the appendix for the details of the analysis done with various fill targets.

Table of Contents
1. 2. 3. 4. 5. Introduction .................................................................................................................................... 4 Statistical Analysis ........................................................................................................................... 4 Conclusion ....................................................................................................................................... 5 References ...................................................................................................................................... 5 Appendix A ...................................................................................................................................... 5

1.

Introduction

The case aims to determine the optimum fill target that Amore needs to set for its frozen cheese and macaroni pie. Amore had set an uncharacteristically high fill target of 8.44 ounce to safeguard itself from fines being levied by FDA for underweight macaroni and cheese. Notwithstanding this it was operating well above the industry practice of 8.22 ounce.

2.

Statistical Analysis

Based on the production and costing data that has been supplied we have been able to come up with the profitability figures for Amore for the following fill rates: 8.44 ounces The current operating fill rate of AMORE 8.22 ounces The current industry standard fill rate 8.1023 ounces The minimum fill rate that can be achieved considering the industry practice of 85% confidence interval

In calculating the minimum fill rate for a confidence interval of 85% it has been assumed that the five samples taken by QC every twenty minutes have the following characteristics:

The samples are independent The samples follow a normal distribution

The profitability figures considering the three different fill rates come out as follows: 8.44 ounces Profit of $1,079,351.64 8.22 ounces Profit of $1,105,797.79 8.1023 ounces Profit of $699,995.68 8.21 ounces Profit of $1,105,435.51

The details of the statistical calculations have been mentioned in the spreadsheet attached in Appendix A.

3.

Conclusion
Thus assuming that the effects of dehydration do not let the fill rate of 8.1023 ounces drop below 8.00 ounces we can conclude that the fill rate of 8.1023 is the most cost saving for AMORE FROZEN FOODS. But as the charity amount is too high at this rate, the profit is not maximum. Moreover the fill rate of 8.1023 is too aggressive to aim at, AMORE can aim at something in the range of 8.1023 to 8.22 ounces to increase its profitability as well as meet industry expectations.

At the fill rate 8.21 ounces, no charity is required. But as the thrift store price is $0.90 less than the regular price, it is also not meeting profit maximization. As per the analysis, 8.22 ounces is the best fill rate to do profit maximization.

This statistical analysis clearly shows that the current operating level of 8.44 ounces is well beyond the level that AMORE should operate to meet industry expectations to stay competitive in the market

4.

References

-Amore Frozen Foods (A) Cheese and Macaroni Fill Targets.

5.

Appendix A

AMORE.xlsm