Reference no: EM132950376

Julia is a small bakery shop owner producing and selling cakes. Recently, she successfully secured a contract to supply cupcakes for five weddings in a month. Luckily all five customer order the signature menu that is VS Cupcake. However, an issue arise when she has low stock on strawberry compote, which is one of the main ingredient. Due to high number of orders, she decide to purchase ready made strawberry compote rather than make it from scratch like usual.

To help guide her decision, she has assembled product costing information as the following to make 5kg strawberry compote:


RM
Variable cost:

Strawberry 350
Sugar 100
Lemon juice 50

Fixed Cost

Electricity 120
Kitchen helper 100
Depreciation of kitchen equipment 50
Total Cost 770

At the same time, she has been offered to purchase it at RM600 by SCW Sdn Bhd, a new supplier which she has never worked with before. Her regular supplier was unable to provide the goods at a short period of time.

Required:

Problem a. Specify the accuracy of product costing given in the question and its appropriateness to support decision making.

Problem b. Provide two (2) recommendation supported with calculations that is considered, as necessary.

Problem c. Justify two (2) factors to be considered before final decision is made.