In response to a growing awareness of gluten allergies, Wildhorse Bakery tried using gluten-free flour in its
Question:
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 | $125 | $125 | $125 | |||||||||
| Variable cost | $75 | $80 | $78 | |||||||||
| Fixed cost | 17 | 14 | 21 | |||||||||
| Total cost | 92 | 94 | 99 | |||||||||
| Gross profit | $33 | $31 | $26 | |||||||||
| Pounds of flour | 2.5 | 2.5 | 2 |
(a)
Assuming no raw material constraints and unlimited demand for cookies, calculate contribution margin per batch for Chocolate Chip, Sugar, Oatmeal Raisin cookies. (Round answers to 2 decimal places, e.g. 52.75.)
| Cookies | Contribution Margin | |
|---|---|---|
| Chocolate Chip | $enter a dollar amount rounded to 2 decimal places | |
| Sugar | $enter a dollar amount rounded to 2 decimal places | |
| Oatmeal Raisin | $enter a dollar amount rounded to 2 decimal places |
What type of cookie would maximize the company's contribution margin?
select a type of cookie Chocolate ChipSugarOatmeal Raisin |
(b)
Assume that, based on typical customer demand, Wildhorse will sell 11,800 batches of chocolate chip cookies, 7,800 batches of sugar cookies, and 9,800 batches of oatmeal raisin cookies. What will the company's contribution margin be?
| The company's contribution margin | $enter the company's contribution margin in dollars |
(c)
Wildhorse's flour supplier has announced a shortage of gluten-free flour. As a result, Wildhorse will only be able to purchase 49,100 pounds of flour. How many batches of each type of cookie should the company bake?
| Batches | ||
| Chocolate Chip | enter a number of batches | |
| Sugar | enter a number of batches | |
| Oatmeal Raisin | enter a number of batches |
What will the company's contribution margin be?
| The company's contribution margin | $enter the company's contribution margin in dollars |
(d)
If Wildhorse uses gluten-free flour in other products, will the allocation you recommend in part (c) change?
select an option YesNo |
Expert Answer:
Answer a Contribution Margin Calculations Chocolate Chip Contribution Margin Sales Price Variable Co... View the full answer
