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Firefox Fle Edit View History Bookmarks Tools Window Help omePeopieSont session expredTITANim2017 ACCT 2018-1Chapter 10 A CSUF Portal Home TITANum Fall 2017 ACCT 2018-13 Chepter 10 tion.comfm tpx?.0.6 7535721 16282 883_151208291 7013 , search 1.00 points The Harrington Honey Company purchases honeycombs from beekeepers for $2.8 a pound. The company produces two main from the honeycombs-honay and beeswax. Honoy is drained from the and then the honeycombs are melted down to form cubes of beeswax. The beeswax is sold for $2.4 a pound The honey can be sold in raw form for $3.8 a pound. However, some of the raw honey is used by the company to make honey drop candies. The candies are packed in a deccrative container and are sold in gift and specialty shops. A container of honey drop candies sels for $5.2 Each container of honey drop candies contains three quarters of a pound of honey. The othor variabie costs associated with making the candies are as follows: Othor ingredients Direct labor Variable manufacturing overhead $ 0.50 0.30 0.25 Total variable manufacturing cost $1.20 The monthly fixed manufacturing overhead costs associated with making the candes follow Master candy maker's salary Depreciation of candy making equipment $4,400 500 Total fixed manufacturing cost $4,900 The master candy maker has no duties ather than to oversee production of the honey drop candies. The candy making equipment is special-purpose equipment that was constructed specifically to make this particular candy. The equipment has no resale value and does not wear out through use A salesperson is paid $2.000 per month plus a commisson of 4% of sales to market the honey drop The company had enjoyed robust sales of the candies for several years, but the recent entrance of a competing product into the marketplace has depressed sales of the candies. The managoment of the company is now wondering whether it would be more profitable to sell al of the honey rather than converting some of it into candies 1. What is the incremental contribution margin per container from further processing the honey into Slide 112 of 119 English (United Statos

Explanation / Answer

What is the incremental contribution margin per container from further processing honey into candies?

Selling price of a container of honey drop candles

$5.20

Selling price of three quarters of a pound of honey

$2.85

($3.8*3/4)

Incremental revenue per customer

$2.35

Incremental variable costs:

Decorative container

0.5

Other ingredients

0.3

Direct labor

0.25

Variable manufacturing overhead

0.15

Commissions

0.208

$1.41

($5.2*4%)

Incremental variable cost per container

$0.94

what is the minimum number of candy must be sold each month to justify the continued processing

Master candy maker salary

4400

Sales person fixed compensation

2000

Avoidable fixed costs

6400

Avoidable fixed costs/Incremental Contribution Margin

6808.511