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Question - Alex Confectioners runs a bakery. It bakes at least 50 units at a time. A customer placed an order for 600 cakes. Following cost would be incurred for a batch:
Direct materials - INR 5,000
Direct wages - INR 500 (irrespective of units)
Oven set- up cost - INR 750 (irrespective of units)
The bakery absorbs production overheads at a rate of 20% of direct wages cost. 10% is added to the total production cost of each batch to allow for selling, distribution and administration overheads. AC requires a profit margin of 25% of sales value.
Required -
1. DETERMINE the price to be charged for 600 cakes.
2. CALCULATE cost and selling price per cake.
3. DETERMINE what would be selling price per unit If the order is for 605 cakes.
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