In response to a growing awareness of gluten allergies, Singletary Cookie Compan
ID: 2492699 • 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:
1.5
Singletary’s flour supplier has announced a shortage of gluten-free flour. As a result, Singletary will only be able to purchase 45,050 pounds of flour.
How many batches of each type of cookie should the company bake?
What will the company’s contribution margin be?
Chip Sugar Oatmeal
Raisin Sales price $130.00 $110.80 $128.70 Variable cost $81 $63 $87 Fixed cost 19 16 20 Total cost 100.00 79.00 107.00 Gross profit $30.00 $31.80 $21.70 Pounds of flour 2 2
1.5
Explanation / Answer
Singletary Cookie Details per Batch Chocolate Chips Sugar Oatmeal Raisin Sales Price 130.00 110.80 128.70 Variable cost 81.00 63.00 87.00 Contribution Margin 49.00 47.80 41.70 Pound of flour required per batch 2.00 2.00 1.50 Contribution Margin per pound of flour 24.50 23.90 27.80 Ranking in Contribution margin/pound 2.00 3.00 1.00 As Oatmeal raisin provides highest Contribution margin per pound of flour, the avialble 45050 pounds of flour should be used for Oatmeal raisin cookie assuming that there is no sales constarint. Cookie type No Of Batches Chocolate Chips - Sugar - Oatmeal Raisin 30,033.33 Contribution margin will be =30033.33*41.70= $ 1,252,390
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