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Question 2: Mustang Juice has the capacity to make 18,000 gallons of cold-pressed juice annually. The company has two categories of customers, A and B,
Question 2: Mustang Juice has the capacity to make 18,000 gallons of cold-pressed juice annually. The company has two categories of customers, A and B, and operates in two seasons, hot and cold. Customer group A buys 4,500 gallons of juice in the hot season and 4,500 gallons of juice in the cold season. Customer group B buys 4,500 gallons in the hot season and zero gallons of juice in the cold season. Assume that each year has 6 hot months and 6 cold months, and that Mustang has the same productive capacity in the hot and cold months. The total cost of Mustang's many juicing machines, which are fully utilized in the hot months, is $27,000 per year. Required: a) Determine the appropriate juicing-machine allocation rate for the off-peak period using the unused capacity cost principle (1 POINT, ALL OR NOTHING) b) Determine the appropriate juicing-machine allocation rate for the peak period using the unused capacity cost principle (1 POINT, ALL OR NOTHING)
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