In response to a growing awareness of gluten allergies, Sheridan Bakery tried us
ID: 2564789 • Letter: I
Question
In response to a growing awareness of gluten allergies, Sheridan Bakery 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:
a. Assuming no raw material constraints and unlimited demand for cookies, calculate contribution margin per batch for Chocolate Chip, Sugar, Oatmeal Raisin cookies.
b. Assume that, based on typical customer demand, Sheridan will sell 11,400 batches of chocolate chip cookies, 7,400 batches of sugar cookies, and 9,400 batches of oatmeal raisin cookies. What will the company’s contribution margin be?
c. Sheridan’s flour supplier has announced a shortage of gluten-free flour. As a result, Sheridan will only be able to purchase 36,900 pounds of flour.
How many batches of each type of cookie should the company bake?
What will the companies contribution margin be?
ChocolateChip Sugar Oatmeal
Raisin Sales price $131.60 $110.60 $130.60 Variable cost $82 $62 $88 Fixed cost 17 14 19 Total cost 99.00 76.00 107.00 Gross profit $32.60 $34.60 $23.60 Pounds of flour 2 2 1.5
Explanation / Answer
1)
42.6
2)Contribution margin :[49.6*11400]+[48.6*7400]+[42.6*9400]
= 565440+ 359640+ 400440
= 1,325,520
3)Total flour required to meet customer demand :[11400*2]+[7400*2]+[9400*1.5]
= 22800+ 14800+ 14100
= 51700
since available flour is limited ,we have to restrict production of cookies .
we will produce that cookie first that gives highest contribution per constraint resource.
Total contribtuion = [11400*49.6]chips+[0*48.6]sugar+[9400*42.6]oatmeal
= 565440+ 0+ 400440
= 965880
choclate chips sugar oatmeal rasin sales price 131.6 110.6 130.6 less:variable cost -82 -62 -88 contribution margin 49.6 48.642.6
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