In response to the growing awareness of gluten allergies, Sheridan Bakery tried using gluten-free flour in its
Question:
In response to the growing awareness of gluten allergies, Sheridan Bakery tried using gluten-free flour in its three most popular cookies. After several tries and many inedible cookies, the company perfected new recipes that produce delicious gluten-free cookies. The costs of producing a batch of 100 cookies are as follows:
| Chocolate Chip | Sugar | Avena Pasa | ||||||||||
| Sale 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 | |||||||||
a. Assuming no raw material restrictions and unlimited demand for cookies, calculate the contribution margin per batch for the chocolate chip, sugar, and 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 be the company's contribution margin?
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 be the contribution margin of the companies?
Expert Answer:
a The contribution margin per batch for each type of cookie can be calculated using the following fo... View the full answer
