Question 1 (30 marks): Acme Pie Company Ltd. is a new pie manufacturer who has an unbelievably awesome pie recipe. They have provided you with the following estimates for the month of March 1994. $2.10/pie $1.25/pie $6,750/month Direct labour Direct materials Total manufacturing overhead (based on 3,000 pies) Total manufacturing overhead (based on 4,500 pies) Packaging Advertising Administration $7,725/month $0.25/pie $4,500/month $1,600/month Acme has been approached by Calhorns, a new trendy coffee bar in town, to buy all of its pies. If the offer was accepted, Acme could eliminate its advertising costs and reduce its packaging costs by 60%. HINT: The company uses the HIGH/LOW method of segregate mixed costs. REQUIRED: Consider each of the following independent cases: (a) (10 marks) If Acme does not accept Calhorns offer, it will sell its pies to the public at $7.95/pie. i) How many pies must Acme sell to the public to breakeven? ii) How many pies must be sold to make a $5,000 profit? b) (10 marks) Assuming that Calhorns offers to pay $6.45/pie, how many pies must Acme sell to Calhorns in order to breakeven for the month? c) (6 marks) Assuming that Calhorns offers to buy 3,500 pies, i) What is the lowest price per pie that Acme may accept in order to at least breakeven? ii) What price must be charged to make a $2,500 profit? (d) (4 marks) At what volume of pies would Acme be indifferent between selling to the public at $7.95/pie and selling to Calhorns at $6.45/pie