Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

3. The Olde English Tea Company markets two brands tea, each of which is a blend of the leaves from several sources. Sophisticated tea drinkers

image text in transcribed
3. The Olde English Tea Company markets two brands tea, each of which is a blend of the leaves from several sources. Sophisticated tea drinkers with sensitive noses respond most strongly than other consumers to a tea's fragrance and taste, so that the firm's premium brand commands a higher price than its standard brand. The Table A below lists information on the fragrance and tasted ratings of tea leaves from the different sources, as well as the minimum quality standards for the firm's two brands. The fragrance and taste ratings of the blends are weighted averages of the ratings of the types of leaves used, that is, the contribution of each type of tea leaf to the blend is in proportion to the product of its rating multiplied by the fraction by weight in the blend. Table B lists the costs and availability of tea leaves Table A. Fragrance and Taste Ratings Tea leaves from source A Tea leaves from source B Tea leaves from source C Tea leaves from source D Premium brand of tea Standard brand of tea Fragrance Rating 90 85 80 75 85 Taste Rating 85 90 75 80 84 81 Table B. Cost and Availability of tea leaves Tea leaves from source A Tea leaves from source B Tea leaves from source C Tea leaves from source D Amounts Available Pound 1500 2500 4000 5000 Cost S/Pound 1.05 0.95 0.80 70 he total of the direct and indirect costs for preparing, packaging, and shipping each of the two brands of tea to distributors is $0.25/pound. The wholesale selling price of the tea to the distributors is $2.05/pound of the premium brand and $1.50/pound of the standard brand. The tea company can sell as much of each tea brand as it can produce. a. How much of each brand should be produced during the planning period? b. How much of the tea leaves from each source will be used? c. What will be the costs of tea leaves from the different sources and the total cost of tea leaves? d. How much will be the profit? e. What supplies of tea leaves limit profit

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Reflection On The Adaptation Of International Auditing Standards To SMEs

Authors: Mohamed Hedi Mzah

1st Edition

6204256882, 978-6204256887

More Books

Students also viewed these Accounting questions