Reference no: EM13502500

Question

Boutique Catering is considering expanding the business structure by preparing frozen meals that will be home-delivered. The meals will then only require to be heated up by the customer. As a point of difference the meals will be cooked according to the CSIRO total wellbeing recipe book. The meals Boutique Catering will offer are 'everyday', 'vegetarian' and 'speciality' meals (for people who have allergies). To prepare and cook the meals Boutique Catering is looking at purchasing Frozen Delights which already has the capital equipment to prepare the three types of meals. Frozen Delights provides supermarkets with frozen meals and has spare capacity to supply Boutique Catering with the frozen meals as well as maintain its current customer base. In the table below is an estimation of the cost and hours required to prepare, cook and freeze the meals and hours available to supply Boutique Catering with the meals.

 

	Cost per meal	Preparation (hours)	Cooking (hours)	Freezing (hours)
HOURS REQUIRED
Everyday meals	$8.00	4	8	3
Vegetarian meals	$9.00	10	3	2
Speciality meals	$12.00	8	8	2
HOURS AVALIABLE		800	1200	1000

 

Required

a)   Using solver derive the optimal solutions for how many meals should be prepared to maximize profit.

b)   State the optimum meal mix and the resulting profit

c)   Explain to the General Manager what transfer pricing is and what are two methods that can be used to set the price between divisions?