In response to a growing awareness of gluten allergies, Sandhill Bakery tried us

Question

In response to a growing awareness of gluten allergies, Sandhill 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:

Exercise 8-15 (Part Level Submission) In response to a growing awareness of gluten allergies, Sandhill Bakery tried using gluten-free four 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: Oatmeal Raisin $132.90 $90 19 109.00 $23.90 Chip Sales price Variable cost Fixed cost Total cost Gross profit Pounds of flour $128.40 $79 16 95.00 $33.40 Sugar $108.80 $60 15 75.00 S33.80

Explanation / Answer

Step 1: Calculation of contribution margin for each type of cookies:

Contribution formula = Sale price - Variable cost

1. Chocolate chip cookies = 12800 / 100 = 128 batches

Contribution margin = 128 * 128.40 - 128 * 79 = 6323.2

2. Sugar cookies contribution margin = 4294.4 with the process calculated above.

3. Oatmeal raisin cookies contribution margin = 4633.2 with the process calculated above.

So contribution margin = 6323.2 + 4294.4+ 4633.2 = 15250.8 which is correct as mentioned in the question.

Step 2: Pounds needed to produce the batches.

1. Chocolate chips = 12800 batches * 2 pounds for 1 batch = 25600 pounds

2. Sugar = 8800 batches * 2 pounds for 1 batch = 17600 pounds

3. Oatmeal raisin = 10800 batches * 1.5 pounds for 1 batch = 16200 pounds

Step 3: Calculation of required batches to be produced with 41800 pounds of flour

1. Chocolate chip cookies = 12800 batches with 25600 pounds which is correct

2. Sugar cookies = 0 batches which should be corrected

3. Oatmeal raisin = 10800 batches with 16200 pounds which should be corrected

Since in Step 1 as contribution margin for sugar cookies is less than oatmeal raisin, so the the remaining pounds after producing chocolate chip cookies for 25600 pounds, should be used for the production of oatmeal raisin of 16200 pounds and the production of sugar cookies is eliminated as its contribution is lower compared to remaining both of the cookies.

Contribution margin: 6323.2 + 4633.2 = 10956.4

1. Chocolate chips = 6323.2 same as calculated in Step 1

2. Oatmeal raisin = 4633.2 same as calculated in Step 1

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