Calculate the unit contribution margin for each batch

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Reference no: EM133017336

Question: Flying High Pies manufactures gourmet pies for speciality restaurants.

The vegetarian filling of the pie is made by the mixing division and is then transferred to the baking division. At the baking division the filling is added to the pastry case, baked and packaged, ready to be sold to the customer. The standard cost of a family pie is as follows: Mixing (Filling) Division Baking Division Direct material $2.50 $4.50 Direct labour $3.00 $2.50 Variable overhead $4.50 $4.50 Total standard costs $10.00 $11.50 Flying High Pies is considering using the existing equipment to manufacture fruit pies as well as vegetarian pies.

Management wants to know if this is a viable option. The following unit information is given Vegetarian Fruit Unit Selling Price $10.00 $6.00 Unit Variable cost $ 6.00 $3.00 The same machine is used to manufacture the vegetarian and fruit pies. Machine capacity is 10 hours per day. The vegetarian pie requires 4 hours of machine time per batch while the fruit pies requires 2 hours of machine time per batch.

Calculate the unit contribution margin for each batch

Reference no: EM133017336

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