KC, a fast-food restaurant, serves fried chicken, fried fish, and French fries. The managers have estimated the costs of a batch of fried chicken for KC's all-you-can-eat Friday Fried Fiesta. Each batch must be 100 pieces. The chicken is precut by the chain headquarters and sent to the stores in 10-piece bags. Each bag costs $4. Preparing a batch of 100 pieces of chicken with KC's special coating takes one employee two hours. The current wage rate is $8 per hour. Another cost driver is the cost of putting fresh oil into the fryers. New oil, costing $6, is used for each batch.
Round answers to two decimal places, when applicable.
(a) Determine the cost of preparing one batch of 100 pieces.
(b) If management projects that it will sell 300 pieces of fried chicken, determine the total batch costs and unit costs.
(c) If management estimates the sales to be 350 pieces, determine the total costs.
(d) How much will the batch costs increase if the government raises the minimum wage to $10 per hour?
(e) If management decided to reduce the number of pieces in a batch to 50, determine the cost of preparing 350 pieces. Assume that the batch would take half as long to prepare, and management wants to replace the oil after 50 pieces are cooked.
a) The cost of preparing one batch of 100 pieces
$40 Material cost (10 pieces bag of $4 each * 10)
$16 Labor cost (2 hours * $8 current wage rate)
$6 Fresh oil cost per batch of 100 pieces
Total cost $62 for preparing one batch of 100 pieces
b) For 300 pieces of fried chicken the total batch costs and unit costs
Total Batch cost = $62 * 3 = $186 (for 300 pieces i.e 3 batches of 100 pieces each)
Unit cost = $186/300 pieces = $0.62 per piece
c) For 350 pieces of fried chicken the total batch costs and unit costs
Since each batch must be 100 pieces of fried chicken, 400 pieces will be prepared to sell 350 pieces
Total cost = $62 * 4 = $248 (for 400 pieces i.e 4 batches of 100 pieces each)
d) Batch cost when wage rate per hour is $8 = $62 ( Calculate in part a)
If wage rate is increase to $10 per hour then batch cost will be
$40 Material cost (10 pieces bag of $4 each * 10)
$20 Labor cost (2 hours * $10 current wage rate)
$6 Fresh oil cost per batch of 100 pieces
Total cost $66 for preparing one batch of 100 pieces
Batch cost will increase by $4
e) Batch cost if 50 pieces are prepared in one batch
$20 Material cost (10 pieces bag of $4 each * 5)
$10 Labor cost (1 hours * $10 current wage rate)
$6 Fresh oil cost per batch of 50 pieces
Batch cost $36 for preparing one batch of 50 pieces
For preparing 350 pieces, 7 batches will be prepared
Total cost = $36 * 7 = $252 cost of preparing 350 pieces
KC, a fast-food restaurant, serves fried chicken, fried fish, and French fries. The managers have estimated...