Does the larger cold room produce the better result?
Compare saleable output and lease costs. Revisit the choice when a road closure cuts access.
The question
Saffron Route Produce is a fictional Indian distributor choosing one cancelable lease for one week. Saleable fruit earns INR40,000 per tonne. Rejected fruit earns nothing. Handling costs apply to input tonnes. Pay only the chosen lease.
| Current | Remote | |
|---|---|---|
| Input capacity, tonnes | 100 | 140 |
| Forecast input, tonnes | 100 | 120 |
| Saleable yield | 90% | 80% |
| Price, INR per saleable tonne | 40000 | 40000 |
| Handling, INR per input tonne | 8000 | 10000 |
| Lease, INR per week | 1000000 | 1200000 |
Rejected fruit earns nothing. Pay only the chosen lease.
“Which site produces more weekly surplus? Recheck the choice if the current site can receive only 60 tonnes.”
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A strong answer, step by step
Open each step in turn. This is one strong answer, not the only one.
Step 1: Which volume earns revenue?
What would you do here? Open the move you’d make.
Apply revenue to saleable tonnes and handling to input tonnes.
The strong move. This applies each rate to its stated base.
Apply both rates to the capacity in the exhibit.
Tempting, but it misses something. The remote site has only 120 forecast input tonnes despite room for 140.
Apply revenue and handling only to saleable tonnes.
Tempting, but it misses something. The packet charges handling for all input, including rejects.
See how a strong candidate says it
“Use the lower of input capacity and available input, then multiply by saleable yield. Apply revenue to saleable tonnes and handling cost to all input tonnes.”
Why it works: Capacity, input and saleable output answer different questions.
Step 2: How do the two weekly surpluses compare?
What would you do here? Open the move you’d make.
Compare saleable tonnes alone: 90 versus 96.
Tempting, but it misses something. This ignores the two cost differences that reverse the result.
Compare the two surpluses using the chosen lease only.
The strong move. It includes each option’s costs on the same one-week basis.
Charge both leases to the remote choice.
Tempting, but it misses something. Only the chosen lease is due in the exercise.
See how a strong candidate says it
“Current: 90 saleable tonnes × INR40,000 − 100 × INR8,000 − INR1,000,000 = INR1,800,000. Remote: 96 × INR40,000 − 120 × INR10,000 − INR1,200,000 = INR1,440,000.”
Why it works: Remote sells six more tonnes but also has higher handling and lease costs.
Step 3: Which site would you choose before the closure?
What would you do here? Open the move you’d make.
Choose remote because it can receive 140 tonnes.
Tempting, but it misses something. The forecast supplies only 120 tonnes, and the extra room does not cover the higher costs.
Choose remote because it has six more saleable tonnes.
Tempting, but it misses something. Those six tonnes do not outweigh the cost difference.
Choose current and check the yield and access assumptions.
The strong move. It states the higher surplus and names inputs that could reverse it.
See how a strong candidate says it
“I would choose the current site. It earns INR360,000 more for the week at the stated yields and access. I would verify both inputs before committing.”
Why it works: More room is valuable only when it produces a better decision outcome.
Step 4: Current-site access falls to 60 tonnes. What changes?
What would you do here? Open the move you’d make.
Recompute current at 60 input tonnes and leave remote unchanged.
The strong move. It changes only the affected input and compares the same weekly measure.
Scale the entire current surplus by 60%.
Tempting, but it misses something. The lease is fixed and must not scale with volume.
Reduce both forecasts by 40%.
Tempting, but it misses something. The road closure does not limit the remote site.
See how a strong candidate says it
“Current now earns 54 × INR40,000 − 60 × INR8,000 − INR1,000,000 = INR680,000. Remote stays at INR1,440,000. I would choose remote for this week; it earns INR760,000 more.”
Why it works: The closure changes received input. It does not change the current lease cost or remote input.
The answer, in short
- Decision
- Use remote during the road closure.
- Because
- At 60 input tonnes, current earns INR680,000 versus INR1,440,000 at remote.
- What would change it
- At about 87.14 input tonnes current matches remote; at 88 whole tonnes it would earn more.
Common traps
- Treating maximum capacity as the actual volume.
- Applying revenue to rejected tonnes.
- Scaling fixed lease costs with input.
Check your answer
- Did you keep input and saleable tonnes separate?
- Did you apply both cost bases correctly?
- Did you compare weekly surplus?
- Did you revise only the site affected by the closure?
Last reviewed Nov 11, 2026