Question
MC, Inc., produces ravioli, tortellini, and other cheese-filled pastas. Each unit of pasta contains 0.5 ounces of filling. Management estimates that MC will use 10,000
MC, Inc., produces ravioli, tortellini, and other cheese-filled pastas. Each unit of pasta contains 0.5 ounces of filling. Management estimates that MC will use 10,000 pounds of cheese filling each month. The costs associated with each pound of filling consist of $5.32 direct materials, $7.48 direct labor, $7.30 variable overhead, and $6.50 fixed overhead. Pasta Specialties has offered to supply 10,000 pounds of cheese filling each month for $202,600. If MC accepts the offer, 50% of the fixed overhead will not be incurred. Additionally, 50% of the direct labor hours will no longer be needed, and the workers will be laid off. The remaining direct labor hours will be used by the packaging department. In this situation, what is MCs relevant cost per pound of cheese filling?
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