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:

a. Assuming no raw material constraints and unlimited demand for cookies, what type of cookie would maximize the company’s contribution margin? Why?
b. Assume that based on typical customer demand, Singletary will sell 12,000 batches of chocolate chip cookies, 8,000 batches of sugar cookies, and 10,000 batches of oatmeal raisin cookies. What will the company’s contribution margin be?
c. Singletary’s flour supplier has announced a shortage of gluten-free flour. As a result,
Singletary will only be able to purchase 50,000 pounds of flour. How many batches of each type of cookie should the company bake? What will the company’s contribution margin be?
d. If Singletary uses gluten-free flour in other products, will the allocation you recommend in part (c) change? Why or whynot?

  • CreatedFebruary 21, 2014
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