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?

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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
Transcribed Image Text: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
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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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