per month 3. Micaylaco makes chocolate-chip (CC) and peanut-butter (PB) cookies.
ID: 2519598 • Letter: P
Question
per month 3. Micaylaco makes chocolate-chip (CC) and peanut-butter (PB) cookies. Treat each of the following scenarios separately. In each case, assume that the offer is "all or nothing- if Micaylaco accepts an offer it must accept the whole offer (and possibly give up part of its usual sales) Micayl limited only by labor hours: it can only use 600 hours of labor each month aco's capacity is Always Stayt Current Volume (dozens) Sales Price per dozen Variable Costs per dozen Labor to make one dozen CC Cookies 600 $20 $8 0.5 hours PB Cookiessart 800 S21.50 wit $11 02S hours Pacity caleulation A. Conorco has offered to buy 400 dozen chocolate-chip cookies each month for $18 per dozen. If Micaylaco accepts this offer, it will eliminate S100 per month in advertising costs. Should Micaylaco accept Conorco's offer? Marianneco has offered to buy 500 dozen peanut-butter cookies from Micaylaco each month. Micaylaco insists on organic peanut butter, which will increase Micaylaco's variable costs per dozen. What is the minimum price Micaylaco should charge Marianneco for the order? by $2.50Explanation / Answer
A) NO. because through this micaylaco get a loss of $1.75 per dozen.
Normal sale of 400 dozen CC cookies
sales $20
less variable cost $8
= contribution 12
micaylaco accept the conorco's offer:
sales $18
less variable cost $8
= contribution $10
thorugh accepting this offer, it will reduce $100 advertisement cost
avoidable fixed cost per dozen is = $100 / 400 = $.25
total contribution = $10 + $.25 = $10.25 per dozen.
diiference = $12 - $10.25 = $1.75 per dozen
B) minimum price of PB cookies for Marianneco offer
in this problem the micaylaco has excees capacity
hours needed for CC cookies = 600 * 0.5 hour per dozen
= 300 hours
hours needed for PB cookies = 800 * 0.25 hour per dozen
= 200 hours
Total hours in a month = 600 hours
difference = 600 - 300 - 200 = 100 hours excess.
In excess capacity, the minimum amount for the order is the total variiable cost:
variable cost = $11 per dozen
Increase in varialble cost = $2.50
total variable cost = $13.5 per dozen.
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