Can someone help me calculate the lifecyle cost per 125-gm block of the DC Brie and Blue Brie? And comments on the results please! I'm a bit lost :( thanks!

Question One: Riverstone Cheeses Limited (RCL) Table 1. Full Production Costs DC Brie DC Camembert S Direct materials Milk 1.00 1.30 Additives (culture, flavouring, vegetarian 0.40 0.50 enzymes and salt) Packaging material 0.25 0.30 Direct Labour 0.40 0.50 Variable Overhead 0.20 0.25 Allocated Fixed Overhead 0.75 0.75 Total cost per block 3.00 3.60 Cost-plus price per block (66.7% mark-up) 5.00 6.00 River is very happy with the results as he believes the target prices indicated would result in an increase in RCL's overall market share and profit. Riverstone Cheeses Limited (RCL) is a cooperative enterprise owned by several dairy farmers. The cooperative owns a cheese factory where milk is converted into a variety of cheeses. River "Obviously we haven't been charging enough. With what customers are prepared to Crystal is employed as the head cheese maker and Brooke Stone is the managing director and pay, we will make heaps of money on these two cheeses." oversees the accounting and marketing areas. RCL's mission is to "provide quality cheese for the discerning customer." River further suggests that given their customers willingness to pay "top-dollar" for the gourmet product line maybe they should also sell the gourmet Blue Brie, given they have spare River explains the processes involved in making cheese. Milk is received from the dairy farms capacity. Brooke is not so sure as last time they produced blue cheese, they had problems (via tanker), placed in cheese vats and heated. A culture is added to enable the growth of the selling it and did not make the required profit margin. River tells her not to worry because: bacteria necessary to convert the milk into cheese. Once the milk has been heated for the required time, rennet (a vegetarian enzyme) is added to allow cheese curds to form. The cheese "A cheese maker friend down south has an excess of un-packaged Blue Brie and has curds are separated from the whey and any flavouring added. They are then pressed into moulds offered it to us for $2.50 per 125-gram block. Based on figures from the last time we to allow the curd particles to bind and to give the cheese its required shape. At the end of the produced a similar cheese. our full production costs will be $3.05 per 125-gram block. cheese making process, each cheese is individually wrapped (packaged) and then stored in This means we will save $0.55 per block of cheese! The full production costs per 125- specially designed storage areas, as different types of cheese have a range of aging and storage gram block for the Blue Brie will be the same as the DC Brie except for the additives requirements. All the cheese produced by RCL is sold through their on-line store. Customers which are $0.45 per block. pay their own shipping costs. If we can sell the Blue Brie at $7.00 per 125-gram block, which is what our customers River has been developing a new line of gourmet cheeses. The new cheeses include a Double are willing to pay for a gourmet Blue Brie - think of the profit we would make! All we Cream (DC) Brie and a Double Cream (DC) Camembert. Brooke decides that as these new would have to do is wrap it in our Riverstone Gourmet Cheese packaging." cheeses are still in the design stage it would be a good idea to try target costing and see if it is any better than their current full cost-plus pricing approach. A survey of regular customers Later that night, Brook is considering the option of offering the Blue Brie and also reviewing indicates that the price they would pay for a 125-gram block is $6.50 for the DC Brie and $7.50 the figures for the Double Cream Brie and Camembert. She comes to the conclusion that for the DC Camembert. To remain profitable in the long-term, RCL needs to make a profit "something is missing". She knows that they have spent over $4,000 on research and design margin of 40% (return on sales) on their gourmet cheese product range. for the three cheeses (or $0.40 per 125-gram block). Additionally, she wonders about covering their storage, marketing and customer service costs over the 3-year life of the new gourmet To check whether it is possible to achieve the required ROS (return on sales) for the DC Brie cheeses. Shouldn't the estimated $0.60 per 125-gram block for these postproduction costs be and DC Camembert using current production methods, Brooke collects information regarding included? Also are there any risks involved in buying the Blue Brie from River's friend? the expected full production costs for a 125-gram block of each new cheese (Table 1). Suddenly, it all seems too difficult and Brooke decides to come to you, her business partner accountant, to check her calculations and get some advice