Jared Foods manufactures and distributes frozen entrees. Annual production averages 48,000 cases. A large chain store purchases about 50% of Jared's production. Several thousand in¬

dependent grocers purchase the other 50%. Jared incurs the following costs of production per case of entrees:

Jared has one salesperson assigned to the chain store account at a cost of $30,000 per year.
Delivery is made in 1,000 case batches once a month at a delivery cost of $450 per batch.
Three salespeople service the remaining accounts. They call on the stores, and incur salary and mileage expenses of approximately $35,000 each. Delivery costs vary from store to store, averaging $0.65 per case.
Jared charges the chain store $85 per case and the independent grocers $94 per case.
Required:
Is Jared's pricing policy supported by cost differences in serving the two different classes of customer? Support your answer with relevant calculations.

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Direct materials $40 Direct labor 10 Overhead 25 Total $75