In response to a growing awareness of gluten allergies, Singletary Cookie Compan
ID: 2491563 • Letter: I
Question
In response to a growing awareness of gluten allergies, Singletary Cookie Company tried using gluten-free flour in its three most popular cookies. After several attempts and a lot of inedible cookies, the company perfected new recipes that yield delicious gluten-free cookies. The costs of producing a batch of 100 cookies are as follows:
Assume that based on typical customer demand, Singletary will sell 12,200 batches of chocolate chip cookies, 8,200 batches of sugar cookies, and 10,200 batches of oatmeal raisin cookies. What will the company’s contribution margin be?
ChocolateChip Sugar Oatmeal
Raisin Sales price $130.60 $110.60 $132.15 Variable cost $81 $62 $90 Fixed cost 17 14 19 Total cost 98.00 76.00 109.00 Gross profit $32.60 $34.60 $23.15 Pounds of flour 2 2 1.5
Explanation / Answer
Chocolate Chip
Sugar
Oatmeal Raisin
Sales price
$ 130.60
$ 110.60
$ 132.15
Less: Variable cost
$ 81
$ 62
$ 90
Contribution margin per batch
$ 49.60
$ 48.60
$ 42.15
Expected sales (Batches)
12,200
8,200
10,200
Total contribution margin
$605,120
$398,520
$429,930
Company’s Contribution margin = Contribution margin of Chocolate Chip Cookies + Contribution margin of Sugar Cookies + Contribution margin of Oatmeal raisin Cookies
Company’s Contribution margin = $605,120 + $398,520 + $429,930 = $1,433,570
Chocolate Chip
Sugar
Oatmeal Raisin
Sales price
$ 130.60
$ 110.60
$ 132.15
Less: Variable cost
$ 81
$ 62
$ 90
Contribution margin per batch
$ 49.60
$ 48.60
$ 42.15
Expected sales (Batches)
12,200
8,200
10,200
Total contribution margin
$605,120
$398,520
$429,930
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