Mercia Chocolates produces gourmet chocolate products with no preservatives. Any production must be sold within a few days, so producing for inventory is not an option. Mercia's single plant has the capacity to make 90,000 packages of chocolate annually. Currently. Mercia sells to only two customers: Vern's Chocolates (a specialty candy store chain) and Mega Stores (a chain of department stores). Vern's orders 45,000 packages and Mega Stores orders 15,000 packages annually. Variable manufacturing costs are $10 per package, and annual fixed manufacturing costs are $540,000. Required:- Part 1- What cost per package should the cost system report? Why? If you need more information to answer the question, describe it.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Mercia Chocolates produces gourmet chocolate products with no preservatives. Any production must be sold within a few days, so producing for inventory is not an option. Mercia's single plant has the capacity to make 90,000 packages of chocolate annually. Currently. Mercia sells to only two customers: Vern's Chocolates (a specialty candy store chain) and Mega Stores (a chain of department stores). Vern's orders 45,000 packages and Mega Stores orders 15,000 packages annually. Variable
Required:-
Part 1- What cost per package should the cost system report? Why? If you need more information to answer the question, describe it.
Refer to the information in part 1 above. The gourmet chocolate business has two seasons, holi days and non-holidays. The holiday season lasts exactly four months and the non-holiday season lasts eight months. Vern's orders the same amount each month, so Vern's orders 15,000 packages during the holidays and 30,000 packages in the non-holiday season. Mega Stores only carries Mercia's chocolates during the holidays.
Required:-
Part 2 - How would you modify, if at all, the cost system you designed previously for Mercia Chocolates in Part 1? Why?
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