Computing average product cost

Reference no: EM1368101

Burger Doodle is a fast-food restaurant that processes an average of 680 food orders each day. The average cost of each order is $6.15. Four percent of the orders are incorrect, and only 10% of the defective orders can be corrected with additional food items at an average cost of $1.75. The remaining defective orders have to be thrown out.

a. Compute the average product cost

b. In order to reduce the number of wrong orders , Burger Doodle is going to invest in a computerized ordering and cash register system. The cost of the system will increase the average order by $0.05 and will reduce defective orders to 1%. What is the annual net cost effect of this quality-improvement initiatives?

Reference no: EM1368101

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