FUNDAMENTALS OF COST ACCOUNTING BUNDLE
6th Edition
ISBN: 9781260858525
Author: LANEN
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 4, Problem 38E
Pricing Decisions
Assume that MTA Sandwiches sells sandwiches for $7.20 each. The cost of each sandwich follows:
One of MTA’s regular customers asked the company to fill a special order of sandwiches at a selling price of $5.40 each for a fund-raising event sponsored by a social club at the local college. MTA has capacity to fill it without affecting total fixed costs for the month. MTA’s general manager was concerned about selling the sandwiches below the cost of $5.85 and has asked for your advice.
Required
- a. Prepare a schedule to show the impact on MTA’s profits of providing 400 sandwiches in addition to the regular production and sales of 6,000 sandwiches per month.
- b. Based solely on the data given, what is the lowest price per sandwich at which the special order can be filled without reducing MTA’s profits?
- c. What other factors might the general manager want to consider in setting a price for the special order?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
A restaurant bakes its own bread for a cost of $152 per unit (100 loaves), including fixed costs of $30 per unit. A proposal is offered to purchase bread from an outside source for $105 per unit, plus $11 per unit for delivery.
Prepare a differential analysis dated July 7 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread, assuming that fixed costs are unaffected by the decision. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.
Differential Analysis
Make Bread (Alt. 1) or Buy Bread (Alt. 2)
July 7
Make Bread(Alternative 1)
Buy Bread(Alternative 2)
Differential Effecton Income(Alternative 2)
Sales price
$0
$0
$0
Unit Costs:
Purchase price
$fill in the blank 8cd8baf43f9c031_1
$fill in the blank 8cd8baf43f9c031_2
$fill in the blank 8cd8baf43f9c031_3
Delivery
fill in the blank 8cd8baf43f9c031_4
fill in the blank 8cd8baf43f9c031_5
fill in the…
A restaurant bakes its own bread for a cost of $164 per unit (100 loaves), including fixed costs of $34 per unit. A proposal is offered to purchase bread from an outside source for $99 per unit, plus $7 per unit for delivery.
Prepare a differential analysis dated July 7 to determine whether the company should Make Bread (Alternative 1) or Buy Bread (Alternative 2), assuming that fixed costs are unaffected by the decision. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or
negative numbers use a minus sign.
Differential Analysis
Make Bread (Alt. 1) or Buy Bread (Alt. 2)
July 7
Make
Buy
Differential
Bread
Bread
Effect
(Alternative 1) (Alternative 2) (Alternative 2)
Unit Costs:
Purchase price
Delivery
Variable costs
Fixed factory overhead
Total unit costs
Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread.
A restaurant bakes its own bread for a cost of $152 per unit (100 loaves), including fixed costs of $34 per unit. A proposal is offered to purchase bread from an outside source for $100 per unit, plus $11 per unit for delivery.
Prepare a differential analysis dated July 7 to determine whether the company should Make Bread (Alternative 1) or Buy Bread (Alternative 2), assuming that fixed costs are unaffected by the decision. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.
Differential AnalysisMake Bread (Alt. 1) or Buy Bread (Alt. 2)July 7
MakeBread(Alternative 1)
BuyBread(Alternative 2)
DifferentialEffect(Alternative 2)
Unit Costs:
Purchase price
$fill in the blank a6b98b004fd0039_1
$fill in the blank a6b98b004fd0039_2
$fill in the blank a6b98b004fd0039_3
Delivery
fill in the blank a6b98b004fd0039_4
fill in the blank a6b98b004fd0039_5
fill in the blank a6b98b004fd0039_6
Variable costs…
Chapter 4 Solutions
FUNDAMENTALS OF COST ACCOUNTING BUNDLE
Ch. 4 - Fixed costs are often defined as fixed over the...Ch. 4 - What is the difference between a sunk cost and a...Ch. 4 - Are sunk costs ever differential costs? Explain.Ch. 4 - What is the difference between short-run and...Ch. 4 - What costs are included in the full cost of a...Ch. 4 - What costs are included in the full cost of a...Ch. 4 - What costs should be considered for a special...Ch. 4 - What are life-cycle product costing and pricing?Ch. 4 - Prob. 9RQCh. 4 - What do the terms target cost and target price...
Ch. 4 - What is predatory pricing? Why is it illegal in...Ch. 4 - What is dumping? What role would a cost accountant...Ch. 4 - What is price discrimination? How could a cost...Ch. 4 - If we want to maximize profit, why do we use unit...Ch. 4 - A company has learned that a particular input...Ch. 4 - Why are production constraints important in...Ch. 4 - What are some nonfinancial factors in decisions to...Ch. 4 - Prob. 18RQCh. 4 - Prob. 19CADQCh. 4 - Prob. 20CADQCh. 4 - As a marketing manager for an airline, would you...Ch. 4 - Prob. 22CADQCh. 4 - You buy an airline ticket to New York City to see...Ch. 4 - Consider the Business Application item,...Ch. 4 - One of your acquaintances notes, This whole...Ch. 4 - A manager in your organization just received a...Ch. 4 - Many airline frequent-flier programs upgrade elite...Ch. 4 - Consider the opportunity costs you identified in...Ch. 4 - Prob. 29CADQCh. 4 - Prob. 30CADQCh. 4 - Prob. 31CADQCh. 4 - Prob. 32CADQCh. 4 - Prob. 33CADQCh. 4 - Prob. 34CADQCh. 4 - Prob. 35CADQCh. 4 - Prob. 36ECh. 4 - Prob. 37ECh. 4 - Pricing Decisions Assume that MTA Sandwiches sells...Ch. 4 - Pricing Decisions Rutkey Collectibles is a small...Ch. 4 - Prob. 40ECh. 4 - Special Order Fairmount Travel Gear produces...Ch. 4 - Target Costing and Pricing Sids Skins makes a...Ch. 4 - Target Costing and Pricing Domingo Corporation...Ch. 4 - Target Costing and Purchasing Decisions Mira Mesa...Ch. 4 - Target Costing Kearney, Inc., makes kitchen tools....Ch. 4 - Make-or-Buy Decisions Mobility Partners makes...Ch. 4 - Make-or-Buy Decisions Mels Meals 2 Go purchases...Ch. 4 - Prob. 49ECh. 4 - Dropping Product Lines Freeflight Airlines is...Ch. 4 - Pappy’s Toys makes two models of a metal...Ch. 4 - Christine’s Chronographs makes two models of a...Ch. 4 - Unter Components manufactures low-cost navigation...Ch. 4 - Special Orders Sherene Nili manages a company that...Ch. 4 - Prob. 55PCh. 4 - M. Anthony, LLP, produces music in a studio in...Ch. 4 - Davis Kitchen Supply produces stoves for...Ch. 4 - Make or Buy King City Specialty Bikes (KCSB)...Ch. 4 - Prob. 59PCh. 4 - Prob. 60PCh. 4 - Prob. 61PCh. 4 - Prob. 62PCh. 4 - Prob. 63PCh. 4 - Agnew Manufacturing produces and sells three...Ch. 4 - Prob. 65PCh. 4 - Power Music owns five music stores, where it sells...Ch. 4 - You have been asked to assist the management of...Ch. 4 - Prob. 68PCh. 4 - Prob. 69PCh. 4 - Prob. 70PCh. 4 - Prob. 71PCh. 4 - Prob. 72PCh. 4 - Slavin Corporation manufactures two products,...Ch. 4 - Prob. 74PCh. 4 - Prob. 75P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Carroll Company, a manufacturer of vitamins and minerals, has been asked by a large drugstore chain to provide bottles of vitamin E. The bottles would be labeled with the name of the drugstore chain, and the chain would pay Carroll 2.30 per bottle rather than the 3.00 regular price. Which type of a decision is this? a. Make-or-buy b. Special-order c. Keep-or-drop d. Economic order quantity e. Markup pricingarrow_forwardWings Diner has a box lunch that it sells on football game days at the local university. Each boxlunch sells for $6, which includes $2.50 variable costs and $2.50 fixed costs, plus a $1 markup. Inthe short run, what is the minimum price Wings Diner should charge (i.e., what is the price belowwhich the diner would not normally sell a meal)?arrow_forwardA restaurant bakes its own bread for a cost of $230 per unit (100 loaves), including fixed costs of $47 per unit. A proposal is offered to purchase bread from an outside source for $180 per unit, plus $18 per unit for delivery. Prepare a differential analysis dated July 7 to determine whether the company should make (Alternative 1) or buy (-Alternative 2) the bread, assuming that fixed costs are unaffected by the decision.arrow_forward
- Gooby Gummies makes taffy candy, which it sells at local supermarkets. The fixed monthly cost to produce the candy is $4,000. The main ingredient for the candy, glucose syrup costs $0.21 per pound. Gooby Gummies sells the taffy for $0.75 per pound to supermarkets.The management of Gooby Gummies is thinking of raising the price of the taffy candy to $0.95 per pound. Currently, the company produces and sells 9,000 pounds of taffy candy a month. The management realizes that if they raise the price, the sales will go down to 5,700 pounds per month. By how much will the company's profit per year be affected if Gooby Gummies' management decide to raise the price? Should the company raise its price? Explain your answer.arrow_forwardGooby Gummies makes taffy candy, which it sells at local supermarkets. The fixed monthly cost to produce the candy is $4,000. The main ingredient for the candy, glucose syrup costs $0.21 per pound. Gooby Gummies sells the taffy for $0.75 per pound to supermarkets. The management of Gooby Gummies is thinking of raising the price of the taffy candy to $0.95 per pound. Currently, the company produces and sells 9,000 pounds of taffy candy a month. The management realizes that if they raise the price, the sales will go down to 5,700 pounds per month. By how much will the company's profit per year be affected if Gooby Gummies' management decide to raise the price? Should the company raise its price? Explain your answer.arrow_forwardMarquette has an opportunity to sell its product through an online retailer. To begin selling through this online platform, they are required to ship 2,000 units to the retailers’ order fulfillment warehouse. The other condition of this offer is that they pay a one-time vendor marketing fee of $5,000. To get the units to the fulfillment warehouse by the deadline Marquette will need to pay for expedited shipping at a cost of $10 per unit. What is the minimum price Marquette should charge the retailer for this initial order of 2,000 units? (Show all supporting calculations). (NOTE: ignore taxes or other costs not specifically mentioned in the questions.)arrow_forward
- A restaurant bakes its own bread for a cost of $190 per unit (100 loaves), including fixed costs of $39 per unit. A proposal is offered to purchase bread from an otside source for $148 per unit, plus $15 per unit for delivery. Prepare a differential analysis dated July 7 to determine whether the company should Make Bread (Alternative 1) or Buy Bread (Alternative 2), assuming that fixed costs are unaffected by the decision.arrow_forwardOriole Dinner Box Inc. is a catering company that sells meal kits that its customers can take home and quickly prepare. The company sells its meal kits at local grocery stores and has recently begun to offer a monthly subscription service, which delivers meal kits to the customer's home. Single meal kits can be purchased at grocery stores. Approximately 10% of the kits shipped to grocery stores each month are returned unsold and are then discarded. Oriole charges the grocery stores $15 for each meal kit. In December 2024, Oriole began selling three- month subscriptions for $900. Subscriptions are paid in advance and are non-cancellable. Oriole sold 840 subscriptions on December 1,2024, which entitle the subscriber to 15 meal kits each month beginning in December 2024. During December, 4,620 meal kits were sold, on account, to grocery stores and all required subscriber meals were delivered. Grocery stores have 30-day terms of payment with Oriole. (a1) Your answer is correct. Determine…arrow_forwardA grocery store orders frozen pies in batches from a bakery and sells them in the grocery store. Storing one frozen pie for a year costs $0.85. When the grocery store reorders pies, there is a fixed cost of $8.05 per order as well as $1.15 per pie. Each year, they sell 3500 frozen pies. What is the optimal number of pies to order in each order to minimize their total inventory costs.arrow_forward
- Make or Buy A restaurant bakes its own bread for a cost of $160 per unit (100 loaves), including fixed costs of $33 per unit. A proposal is offered to purchase bread from an outside source for $95 per unit, plus $7 per unit for delivery. Prepare a differential analysis dated July 7 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread, assuming that fixed costs are unaffected by the decision. If an amount is zero, enter "O". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Make Bread (Alt. 1) or Buy Bread (Alt. 2) July 7 Differential Effect Make Bread (Alternative 1) (Alternative 2) Buy Bread on Income (Alternative 2) Sales price $0 $0 $0 Unit Costs: $ Purchase price Delivery Variable costs Fixed factory overhead Make the bread Buy the bread the company should make (Alternative 1) or buy (Alternative 2) the bread.arrow_forwardMake or Buy A restaurant bakes its own bread for a cost of $156 per unit (100 loaves), including fixed costs of $35 per unit. A proposal is offered to purchase bread from an outside source for $101 per unit, plus $12 per unit for delivery. Prepare a differential analysis dated July 7 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread, assuming that fixed costs are unaffected by the decision. If an amount is zero, enter "O". For those boxes in which you must enter subtracted or negative numbers use a minus sign Differential Analysis Make Bread (Alt. 1) or Buy Bread (Alt. 2) July 7 Differential Effect Make Bread (Alternative 1) (Alternative 2) Buy Bread on Income (Alternative 2) Sales price $0 $0 $0 Unit Costs: 101 X 101 X Purchase price 0 12 X 12 Delivery X Variable costs 121 121 35 X 35 X 0 Fixed factory overhead 156 X 148 Income (Loss) X Xarrow_forwardMake or Buy A restaurant bakes its own bread for a cost of $160 per unit (100 loaves), including fixed costs of $32 per unit. A proposal is offered to purchase bread from an outside source for $97 per unit, plus $8 per unit for delivery. Prepare a differential analysis dated July 7 to determine whether the company should Make Bread (Alternative 1) or Buy Bread (Alternative 2), assuming that fixed costs are unaffected by the decision. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Make Bread (Alt. 1) or Buy Bread (Alt. 2) July 7 MakeBread(Alternative 1) BuyBread(Alternative 2) DifferentialEffect(Alternative 2) Unit Costs: Purchase price $fill in the blank $fill in the blank $fill in the blank Delivery fill in the blank fill in the blank fill in the blank Variable costs fill in the blank fill in the blank fill in the blank Fixed factory overhead fill in the…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Cost-Volume-Profit (CVP) Analysis and Break-Even Analysis Step-by-Step, by Mike Werner; Author: Accounting Step by Step;https://www.youtube.com/watch?v=D0MOfse9OWk;License: Standard Youtube License