Exercise 8-15 (Part Level Submission) (a) LINK TO TEXT LINK TO VIDEO (b) LINK TO
ID: 2575917 • Letter: E
Question
Exercise 8-15 (Part Level Submission)
(a)
LINK TO TEXT
LINK TO VIDEO
(b)
LINK TO TEXT
LINK TO VIDEO
(c)
Exercise 8-15 (Part Level Submission)
In response to a growing awareness of gluten allergies, Wildhorse 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:Chocolate
Chip Sugar Oatmeal
Raisin Sales price $127.60 $109.80 $130.20 Variable cost $78 $61 $87 Fixed cost 18 13 21 Total cost 96.00 74.00 108.00 Gross profit $31.60 $35.80 $22.20 Pounds of flour 2 2 1.5
Explanation / Answer
Solution:
In the question Part (a) and Part (b) --- it is already mentioned that these parts are correct. Hence I am solving only Part c which is incorrect. In case you need the answer of part (a) and Part (b) also please let me know I will provide the same.
Part c ---- Wildhorse’s flour supplier has announced a shortage of gluten-free flour. As a result, Wildhorse will only be able to purchase 42,150 pounds of flour.
This question is related to the Key factor. Hence we need to understand first what is key factor.
In this question, the limiting factor is Raw Materials gluten-free flour.
Total Available Quantity of material that can be purchased = 42,150 pounds
First of all we need to calculate the Contribution Margin per unit of pound of flour
Calculation of Contribution Margin per unit of raw material
Chocolate
Chip
Sugar
Oatmeal
Raisin
Unit Selling Price (A)
$127.60
$109.80
$130.20
Unit Variable Cost (B)
$78.00
$61.00
$87.00
Contribution Margin per unit (C = A - B)
$49.60
$48.80
$43.20
Pounds of flour to produce 1 unit (D)
2
2
1.50
Contribution margin per pound of flour (C/D)
$24.80
$24.40
$28.80
Ranking
2
3
1
The Product Oatmeal Raisin should be made first since it has highest contribution margin per pound of flour. Thereafter if raw materials left the product Chocolate Chip should be made.
How many batches of each type of cookie should the company bake ? ---- Since the company has highest contribution margin per pound of flour in Oatmeal Raisin, the company should bake first this product. Since there is no sales demand it is assumed that this product can be sold as much as quantity the company can produce. The company will bake only Oatmeal Raisin.
Calculation of numbers of batches of each type of cookie the company should bake:
Chocolate
Chip
Sugar
Oatmeal
Raisin
Total Available pounds of flour
42150
Pounds of flour to produce 1 unit
1.5
Total Number of Units to be produced
0
0
28100
Number of cookies in One Batch
100
Total Number of batches of cookie
281
What will the company’s contribution margin be ? ---
The company should bake only Oatmeal Raisin, hence the contribution margin from Oatmeal Raisin = 42,150 Pounds of Flour x Contribution Margin per pound of flour $28.80
= $1,213,920
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Calculation of Contribution Margin per unit of raw material
Chocolate
Chip
Sugar
Oatmeal
Raisin
Unit Selling Price (A)
$127.60
$109.80
$130.20
Unit Variable Cost (B)
$78.00
$61.00
$87.00
Contribution Margin per unit (C = A - B)
$49.60
$48.80
$43.20
Pounds of flour to produce 1 unit (D)
2
2
1.50
Contribution margin per pound of flour (C/D)
$24.80
$24.40
$28.80
Ranking
2
3
1
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.