Pharoah’s flour supplier has announced a shortage of gluten-free flour. As a result, Pharoah will only be able to purchase 51,800pounds of flour.How many batches of each type of cookie should the company bake?What will the company’s contribution margin be? In response to a growing awareness of gluten allergies, Pharoah 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. Thecosts of producing a batch of 100 cookies are as follows:ChocolateOatmealChipSugarRaisinSales price$131$125$131Variable cost$83$82$86Fixed cost161519Total cost9997105Gross profit$32$28$26Pounds of flour2.52.52

Pharoah’s flour supplier has announced a shortage of gluten-free flour. As a result, Pharoah will only be able to purchase 51,800pounds of flour. How many batches of each type of cookie should the company bake? What will the company’s contribution margin be?

Pharoah’s flour supplier has announced a shortage of gluten-free flour. As a result, Pharoah will only be able to purchase 51,800pounds of flour. How many batches of each type of cookie should the company bake? What will the company’s contribution margin be?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 1TP: Seda Sarkisian makes wedding cakes from her home. A customer has requested two duplicate wedding...

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Question

Pharoah’s flour supplier has announced a shortage of gluten-free flour. As a result, Pharoah will only be able to purchase 51,800pounds of flour.

How many batches of each type of cookie should the company bake?

What will the company’s contribution margin be?

In response to a growing awareness of gluten allergies, Pharoah 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:
Chocolate
Oatmeal
Chip
Sugar
Raisin
Sales price
$131
$125
$131
Variable cost
$83
$82
$86
Fixed cost
16
15
19
Total cost
99
97
105
Gross profit
$32
$28
$26
Pounds of flour
2.5
2.5
2

Expert Solution

Step 1

Contribution means the difference between the selling price and variable cost. When some input is in short supply , then we need to calculated the contribution per input which is in short supply so that we can utilize the input to product the most profitable product.

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