Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Annie's Homemade is deciding whether to make its own ice cream mix or buy it from a supplier. Ice cream mix, which includes. ingredients such

image text in transcribed
Annie's Homemade is deciding whether to make its own ice cream mix or buy it from a supplier. Ice cream mix, which includes. ingredients such as milk, cream, sugar, and light corn syrup, is the foundational component of all ice cream flavors. The law requires that ice cream mikx be pasteurlzed at a pre-specified temperature for a pre-specified period of time. Once the mix is pasteurized various ingredients, such as vanilla extract, chocolate chips, chocolate powder, brownies, peanut butter cups, and cookies can be added to this "blank canvas" to create specific fiavors. A supplier hos offered to sell Annies posteurized ice cream mix for a price of $10 per galion. The minimum order size is 250 gallons With an associated shipping cost of $500 per ordet. Due to limited temperature-controlled storage capacity, Annie's would need to restrict its order size to the supplier's minimum of 250 gallons. If Annie's makes its own ice cream mix, it would have to rent a pesteurization system for $400 por month. The company pays rent of $3.000 per month for its 1,500 square-feet shop location - of which 225 square-feet would be occupled by the pasteurization system. Whether Annie's buys its ice cream mix from a supplier or makes and pasteurizes its own mix the overall square footage of the shop and the monthly rent will remain unchanged. If Annie's makes its own mix the ingredient cost is $9.00 per gallon, One salaried employee (who is paid $45,000 per year) would oversee Annie's production and posteurization of its own mix, it would take this employee two hours to moke and pasteurize 12.5 gallons of ice cream mix. For every hour the salaried employee works making and pasteurizing ice cream mix, the company would poy another employee $15.00 por hour to step in and manage the shon's other concurrent operations. Required: 1. What is the financial advantage (disedvantage) of buying 250 galions of ice cream mix per month from the supplier? 2. What is the financial advantege (disadvantage) of buying 500 galions of ice cream mix per month from the supplien

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_2

Step: 3

blur-text-image_3

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

Financial Accounting

Authors: Walter T. Harrison Jr., Charles T. Horngren, C. William Thomas, W. Morley Lemon, Catherine Seguin, Sandra Robertson Lemon

4th Canadian Edition

0131384333, 9780131384330

More Books

Students also viewed these Accounting questions