Answered step by step
Verified Expert Solution
Question
1 Approved Answer
[The following information applies to the questions displayed below.) Mel's Meals 2 Go purchases cookies that it includes in the 10.000 box lunches it prepares
[The following information applies to the questions displayed below.) Mel's Meals 2 Go purchases cookies that it includes in the 10.000 box lunches it prepares and sells annually. Mel's kitchen and adjoining meeting room operate at 70 percent of capacity. Mel's purchases the cookies for $0.60 each but is considering making them instead. Mel's can bake each cookie for $0.20 for materials. $0.15 for direct labor, and $0.45 for overhead without increasing its capacity. The $0.45 for overhead includes an allocation of $0.30 per cookie for fixed overhead. However, total fixed overhead for the company would not increase if Mel's makes the cookies. Mel himself has come to you for advice. "It would cost me $0.80 to make the cookies, but only $0.60 to buy. Should I continue buying them?" Materials and labor are variable costs, but variable overhead would be only $0.15 per cookie. Two cookies are put into every lunch. Mel suddenly finds an opportunity to sell boxed dinners. The new opportunity would require the use of the 30 percent unused capacity. The contribution margin from the dinners would amount to $3,000 annually Required: a. If Mel decides to sell dinners, what are the total costs for both making and buying the cookies? Answer is complete but not entirely correct. S Total cost of making cookies Total cost of buying cookies 6,000 5.000 $
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started