Question
In response to a growing awareness of gluten allergies, Sandhill Bakery tried using gluten-free flour in its three most popular cookies. After several attempts and
In response to a growing awareness of gluten allergies, Sandhill Bakery tried using gluten-free flour in its three most popular cookies. After several attempts and a lot of inedible cookies, the company perfected new recipes that yield delicious gluten-free cookies. The costs of producing a batch of 100 cookies are as follows:
Chocolate Chip | Sugar | Oatmeal Raisin | ||||
Sales price | $130 | $125 | $124 | |||
Variable cost | $75 | $80 | $78 | |||
Fixed cost | 18 | 13 | 19 | |||
Total cost | 93 | 93 | 97 | |||
Gross profit | $37 | $32 | $27 | |||
Pounds of flour | 2.5 | 2.5 | 2 |
Sandhill's flour supplier has announced a shortage of gluten-fee flour. As a results, Sandhill will only be able to purchase 48,650 lbs of flour.
a) How many batches of each type of cookie should the company make?
b) What will the company's contribution margin be?
c) If Sandhill uses gluten-free flour in other products, will the allocation you recommend in art (a) change?
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