Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Chocolate Delight Company (CDC) makes specialty chocolates and can produce 40 pieces per hour. The firm estimates that the variable cost of producing chocolate is

image text in transcribed
Chocolate Delight Company (CDC) makes specialty chocolates and can produce 40 pieces per hour. The firm estimates that the variable cost of producing chocolate is $0.35 per piece and each piece sells for $0.60. Smiles For All (SFA) is a large greeting card company and it has asked CDC to produce a special flat chocolate greeting card for them and will pay $2.50 for each chocolate card. The cost to manufacture the new card will be $1.80 each. If this order is accepted, CDC will have to buy a new machine at a cost of $12, 000. The new machine will be able to produce 20 cards per hour. SFA offers to buy 70, 000 cards. CDC has a capacity of 10, 000 machine hours available and fixed costs of $400, 000 for its regular production activity. Required: a. Assume the demand for its own chocolates is 250, 000 pieces. SFA says that the chocolate card order has to be produced in total or not at all. Should CDC accept the special order? b. Assume the demand for its own chocolates is 300, 000 pieces. SFA says that the chocolate card order has to be produced in total or not at all. Should CDC accept the special order? Are there any other considerations that CDC should keep in mind? c. Assume the demand for its own chocolates is 275, 000 pieces and CDC can decide to accept any quantity of the chocolate card order. Determine the mix of chocolates and cards that it should produce

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

The AICPA Audit Committee Toolkit Private Companies

Authors: AICPA

2nd Edition

1940235464, 978-1940235462

More Books

Students also viewed these Accounting questions