Unit- and Batch-Level Cost Drivers

Kentucky Fried Chicken (a reportable operating segment of Yum Brands Inc.), a fast-food restaurant, serves fried chicken. The managers are considering an "all you can eat" promotion and want to know the costs before setting a price. Each batch must be 50 pieces. The chicken is precut by the chain headquarters and sent to the stores in 10-piece bags. Each bag costs $5. Preparing a batch of 50 pieces of chicken with KFC's special coating takes one employee two hours. The current wage rate is $10 per hour. Another cost driver is the cost of putting fresh oil into the fryers. New oil, costing $9, is used for each batch.

Round answers totwo decimal places,when applicable.

(a) Determine the cost of preparing one batch of 50 pieces.

$54

(b) If management projects that it will sell 150 pieces of fried chicken, determine the total cost and the cost per piece.

Total cost $162

Unit cost $1.08

(c) If management estimates the sales to be 350 pieces, determine the total costs.

$378

(d) How much will the batch costs increase if the government raises the minimum wage to $12 per hour?

$4

(e) If management decided to increase the number of pieces in a batch to 100, determine the cost of preparing 350 pieces. Assume that the batch would take twice as long to prepare, pay rate stays at $10 per hour, and management wants to replace the oil after 100 pieces are cooked. Assume no change in expected sales volume. Note that only full batches can be prepared.

$Answer