Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Darryl's donuts is a locally owned shop in Kamloops that makes fresh pastries. The company's most popular item is its namesake - Darryl's Homemade Donut
Darryl's donuts is a locally owned shop in Kamloops that makes fresh pastries. The company's most popular item is its namesake - Darryl's Homemade Donut Darryl asks a supplier what they will charge for 5,000 kgs of dough. The supplier states they will charge $5/kg of dough. Darryl is thrilled, as compared to the cost breakdown below, the supplier's offer seems like a great deal. $ per kg Direct materials 2.25 Direct labour Variable overhead Fixed overhead - note 1 Total cost per kg SI 5.75 1.00 0.50 2.00 Note 1: the fixed overhead consists of 25% cleaning and maintenance around making the dough. The remainder relates to allocated rent and insurance, which will be unaffected. Darryl will now be able to spend the extra time teaching cooking classes at TRU. He will teach 2 courses a year and earn $3,000 per course. Required A) Should Darryl accept the offer? Include this staternent in your answer: "Darryl will [gain/lose] SX by purchasing dough from the supplier." B) Provide one reasonable qualitative consideration Darryl should make before accepting or denying the offer. c) What is the maximum price that Darryl could pay per kilogram to buy the dough from the supplier? (Hint consider the amount where Darryl is indifferent between buying or making dough). Round your answer to two decimal places
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started