Winton Produce packages and distributes three grades of animal feed. The material cost per tonne and estimated annual sales for each of the products are as follows.

Product	Material cost	Estimated sales
Super Premium	$16.00	2,000 tonnes
Premium	$12.00	3,000 tonnes
Economy	$10.00	5,000 tonnes

The indirect cost of operating the machinery used to package all three products is $40 000 per year. In the past, prices have been set by allocating the indirect costs to products on the basis of estimated sales in tonnes. The resulting total costs (material costs plus allocated fixed overhead) are then marked up by 100 per cent.

Required

1. Calculate the price per tonne for each grade of feed using the method described for setting prices. (10 marks)
2. Does the price in part (a) take into account how much customers are willing to pay for the product? (5 marks)

LOG 11.26 +++ Winton Produce package and distribute three grades of animal feed. The material cost per tonne and estimated annual sales for each of the products are as follows. Product Super Premium Premium Economy Material cost $16.00 $12.00 $10.00 Estimated sales 2000 tonnes 3000 tonnes 5000 tonnes The indirect cost of operating the machinery used to package all three products is $40 000 per year. In the past, prices have been set by allocating the indirect costs to products on the basis of estimated sales in tonnes. The resulting total costs (material costs plus allocated fixed overhead) are then marked up by 100 per cent. Required (a) Calculate the price per tonne for each grade of feed using the method described for setting prices. (b) Does the price in (a) take into account how much customers are willing to pay for the product? Explain