Reference no: EM132762276
In order to maintain a modicum of ties to Canada Justin Bieber developed a product called "Blend it like Bieber" a maple and honey blend designed to compete with table syrups, honey, and other honey-like natural sweeteners.
- The honey is sourced from a private Bee Farm on the outskirts of Medicine Hat, Alberta from 4th generation bee farmers. The maple syrup comes from a maple syrup production plant in Val-d'Or in the province of Quebec.
BILB anticipates the following for this coming year
Cost of Goods Sold = $7.70 per liter of blend produced
Gross Sales = $7,637,900
Fixed expenses = $1,484,022
Liters of product produced = 502,645
Variable expenses = $1.20 per liter of blend produced
- Blend it like Bieber has been approached by Tim Horton's to create and sell them individual 30 mL packet portions of the Bieber blend to pair with Tim Hortons Honey Maple Cruller. Tim Hortons has offered a price of $0.40 per unit for 5,000,000 packets annually.
BILB figures the following if they were to create the packets for Tim Hortons.
Cost of Goods Sold
Blend = $0.231 per packet
Package = $0.05 per packet
Fixed Expenses = $612,000 (use as TS&AE in part B)
Gross sales per unit= $0.40
Variable expenses = $0.036 per packet
Desired rate of return = 17.4%
Total Assets = $1,750,000
Problem 1: Should BILB produce the 30 mL packets for Tim Hortons? Why? Show the calculation that brought you to your conclusion.
Problem 2: Calculate the normal selling price per packet.
Problem 3: What is the residual income at the normal selling price?