Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Luxus Baking Company has developed a reputation for producing superb, one-of-a-kind wedding cakes in addition to its normal fare of breads and pastries. While the

Luxus Baking Company has developed a reputation for producing superb, one-of-a-kind wedding cakes in addition to its normal fare of breads and pastries. While the wedding cake business is a major moneymaker, it creates some problems for the bakerys owner, Kari Therau, particularly in June. The companys reputation for wedding cakes is largely based on the skills of Regina Yesterman, who decorates all of the cakes. Unfortunately, last year the company accepted too many cake orders for some June weekends, with the result that Regina was worked to a frazzle and almost quit. To prevent a recurrence, Kari has promised Regina that she will not have to work more than 27 hours in any week to prepare the wedding cakes for the upcoming weekend. (Regina also has other duties at the bakery, so even with the 27-hour limitation, she would be working more than full-time in June.)

A number of reservations for wedding cakes for the first weekend in June had already been received from customers by early May. When a customer makes a reservation, Ms. Therau gets enough information concerning the size of the wedding party and the desires of the customer to determine the cakes price, the cost to make it, and the amount of time that Regina will need to spend decorating it. The reservations for the first weekend in June are listed below:

Customer Incremental Profit Reginas Time Required (hours)
Afonso $ 195 5
Carloni 259 7
Cullins 105 3
Frese 170 5
Gerst 117 3
Jelovich 124 4
Klarr 192 6
Melby 144 4
Rideau 150 5
Towner 256 8
Total $ 1,712 50

For example, the Afonso cake would require 5 hours of Reginas time and would generate a profit of $195 for the bakery. Following industry practice, pricing for the cakes is based on their size and standard formulas and does not reflect how much decorating would be required.

Required:
1.

Ms. Therau feels that she must cancel enough cake reservations to reduce Reginas workload to the promised level. She knows that customers whose reservations have been cancelled will be disappointed, but she intends to refer all of those customers to an excellent bakery across town. If the sole objective is to maximize the companys total profit, which reservations should be cancelled? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)

Rideau
Gerst
Jelovich
Afonso
Towner
Melby
Cullins
Frese
Carloni
Klarr

2. What would be the total profit if your recommendation in part (1) above is followed?

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

Step: 3

blur-text-image

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

More Books

Students also viewed these Accounting questions

Question

Challenges Facing Todays Organizations?

Answered: 1 week ago