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8-15 Allocating constrained resources (LO 4) In response to a growing awareness of gluten allergies, Outland Bakery tried using gluten-free flour in its three most

8-15 Allocating constrained resources (LO 4)

In response to a growing awareness of gluten allergies, Outland Bakery tried using gluten-free flour in its three most popular cookies. After several attempts and 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:

Chocolate Chip

Sugar

Oatmeal Raisin

Sales price

$130

$125

$120

Variable cost

$81

$86

$78

Fixed cost

18

15

20

Total cost

99

101

98

Gross profit

$31

$24

$22

Pounds of flour

2.5

2.5

2

a. Outlands flour supplier has announced a shortage of gluten-free flour. As a result, Outland will only be able to purchase 50,000 pounds of flour. How many batches of each type of cookie should the company bake? What will the companys contribution margin be?

b. If Outland uses gluten-free flour in other products, will the allocation you recommend in part (a) change? Why or why not?

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