Annie's Homemade has been experiencing tremendous sales growth in recent months. The company has one 24-quart batch freezer that it uses to make ice cream and is reluctant to buy a second 24-quart machine or a larger 44-quart machine at the present time. As customer demand begins to exceed the production capacity of the 24-quart batch freezer, the company wants to produce the mix of flavors that will maximize profits. In particular, the company is focusing on its off-site sales which have been exploding in recent months.

While Annie's Homemade sells 16 flavors at its brick-and-mortar shop location, it limits the number of flavors offered at off-site venues. From past experience, the company identified eight flavors (shown below as flavors 1 through 8) that consistently sell-out on the road. It would like to narrow the scope of its off-site sales to its four most profitable flavors. To aid in identifying these flavors, the company provided the following information:

	1	2	3	4	5	6	7	8
Price per serving	$ 5.00	$ 5.00	$ 5.00	$ 5.00	$ 5.00	$ 5.00	$ 5.00	$ 5.00
Servings per batch	80	72	88	100	65	94	84	76
Ingredient cost per batch	$ 81	$ 85	$ 118	$ 92	$ 60	$ 110	$ 76	$ 96
Processing minutes per batch	30	50	20	45	25	40	35	30

Although each batch of production always begins with 10 quarts of ice cream mix and the batch freezer has a 24-quart capacity, the servings per batch differ across flavors because some flavors use many ingredients and others do not. Furthermore, some flavors use bulky add-ins (e.g., brownies, cookies, peanut butter cups) that further increase the output and number of servings. The processing minutes per batch also varies across flavors for numerous reasons. For example, some flavors with higher sugar content take longer to freeze in the batch freezer. Some add-ins take longer to incorporate into the ice cream than others. Finally, any ice cream that includes nuts requires the batch freezer to be sterilized before switching to another flavor to accommodate customers with a nut allergy.

Requirement 1 and 2

Required:

1. Assume Annie's Homemade decided to choose its four most profitable flavors based on each flavors contribution margin per batch.

a. What is the contribution margin per batch for each of the eight flavors of ice cream?

b. For each of the eight flavors, select yes or no from the drop-down menu to indicate if it is or is not one of the four most profitable flavors based on contribution margin per batch.

2. Assume Annie's Homemade decided to choose its four most profitable flavors based on each flavors contribution margin per minute of processing time.

a. What is the contribution margin per minute for each of the eight flavors of ice cream?

Note: Round all answers to the nearest penny.

b. For each of the eight flavors, select yes or no from the drop-down menu to indicate if it is or is not one of the four most profitable flavors based on contribution margin per minute.