Exercise 8-15 (Part Level Submission) In response to a growing awareness of glut

Question

Exercise 8-15 (Part Level Submission) 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: Chocolate Oatmeal Raisin $132.15 $90 19 109.00 $23.15 1.5 Sugar $110.60 $62 ip Sales price Variable cost Fixed cost Total cost Gross profit Pounds of flour $130.60 $81 17 98.00 $32.60 76.00 $34.60 (b) Your answer is correct. 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? The company's contribution margin 1433570

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

Flour required (Pounds)

2

2

1.5

Contribution margin per pound of flour

$ 24.80

$ 24.30

$ 28.10

Since flour is a scarce raw material, the cookies which provides highest contribution margin per pound of flour i.e. Oatmeal raisin cookies should be baked first, the balance flour shall be used for Chocolate Chip cookies and remaining shall be used for Sugar Cookies.

Cookies

Flour available (pounds)

Cookies baked (Batches)

Flour used (pound)

Flour remaining (pounds)

Oatmeal Raisin

51,100

10,200

15,300

35,800

Chocolate Chip

35,800

12,200

24,400

11,400

Sugar

11,400

5,700

11,400

-

Chocolate Chip

Sugar

Oatmeal Raisin

Total

Sales price

$ 130.60

$ 110.60

$ 132.15

Less: Variable cost

$ 81

$ 62

$ 90

Contribution margin per batch

$ 49.60

$ 48.60

$ 42.15

Cookies baked (batches)

12,200

5,700

10,200

Contribution margin

$605,120

$277,020

$429,930

$1,312,070

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

Flour required (Pounds)

2

2

1.5

Contribution margin per pound of flour

$ 24.80

$ 24.30

$ 28.10

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