Reference no: EM133093674
Question - In response to a growing awareness of gluten allergies, Cullumber Bakery tried using gluten-free flour in its three most popular cookies. After several attempts and a lot of inedible cookies, the company perfected new recipes that yield delicious gluten-free cookies. The costs of producing a batch of 100 cookies are as follows:
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Chocolate Chip
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Sugar
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Oatmeal Raisin
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Sales price
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$117
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$110
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$117
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Variable cost
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$65
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$70
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$75
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Fixed cost
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17
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14
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19
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Total cost
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82
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84
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94
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Gross profit
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$35
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$26
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$23
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Pounds of flour
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2.5
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2.5
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2
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Required -
(a) Assuming no raw material constraints and unlimited demand for cookies, calculate contribution margin per batch for Chocolate Chip, Sugar, Oatmeal Raisin cookies. What type of cookie would maximize the company's contribution margin?
(b) Assume that, based on typical customer demand, Cullumber will sell 11,000 batches of chocolate chip cookies, 7,000 batches of sugar cookies, and 9,000 batches of oatmeal raisin cookies. What will the company's contribution margin be?
(c) Cullumber's flour supplier has announced a shortage of gluten-free flour. As a result, Cullumber will only be able to purchase 45,500 pounds of flour. How many batches of each type of cookie should the company bake?
(d) If Cullumber uses gluten-free flour in other products, will the allocation you recommend in part (c) change?
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