Sonoma State University Operations And Supply Chain Management Assignment Help - Special Order Exercise

Question - Earth Baby Inc. (EBI) recently celebrated its tenth anniversary. The company produces
organic baby products for health-conscious parents. These products include food, clothing,
and toys. Earth Baby has recently introduced a new line of premium organic baby foods. Extensive
research and scientific testing indicate that babies raised on the new line of foods will have substantial
health benefits. EBI is able to sell its products at prices higher than competitors because of its
excellent reputation for superior products. EBI distributes its products through high-end grocery
stores, pharmacies, and specialty retail baby stores.

Joan Alvarez, the founder and CEO of EBI recently received a proposal from an old business school
classmate, ...Read More Robert Bradley, the vice president of Great Deal Inc (GDI), a large discount retailer. Mr.
Bradley proposes a joint venture between his company and EBI, citing the growing demand for
organic products and the superior distribution channels of his organization. Under this venture EBI
would make some minor modifications to the manufacturing process of some of its best-selling baby
foods and the foods would then be packaged and sold by GDI. Under the agreement EBI would
receive $3.10 per jar of baby food and would provide GDI a limited right to advertise the product as
manufactured for Great Deal by EBI. Joan Alvarez set up a meeting with Fred Stanley, Earth Baby's
CFO, to discuss the profitability of the venture. Mr. Stanley made some initial calculations and
determined that the direct materials, direct labor, and other variable costs needed for the GDI order
would be about $2 per unit as compared to the full cost of $3(materials, labor, and overhead) for the
equivalent EBI product. ...Read Less

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