FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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HotPie's Bakery's #1 selling product is the Walder Pie. Use this financial information to answer the question.

Sales and Cost Information for Walder Pies

Financial Information at 80% capacity Units and Per Unit Costs Dollars
Sales 10,000 50,000
Direct Materials 1.00 10,000
Direct Labor 1.60 16,000
Variable OH 0.50 5,000
Fixed OH 0.75 7,500

HotPie has discovered that 10% of the time, the chef forgets to brown the butter, making the Walder Pies defective. They can sell the pies to Ramsey Bolton to feed to his dogs for $2/pie. Alternatively, they can rework the pies for an additional per unit cost of $1 in direct materials, $2 in direct labor and $0.10 in variable overhead. the reworked pies can be sold for $5/pie.

How much will HotPie make if they sell the defective pies to Ramsey Bolton?

Group of answer choices

1,000

1,250

5,000

2,000

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