Question

Windsor sells cookies, brownies, and beverages to small local shops. The selling price per brownie is $1.20 and the variable cost is $0.80. The principal of an elementary school asked Windsor to provide 10 dozen brownies for its spring picnic. The principal wants to buy the brownies at Windsor's cost. Unlike with regular sales, each special order brownie must be delivered in a plastic container to protect it from dust. The containers cost is $0.05 each. The brownies can be prepared ahead of time when workers are not busy. Windsor sells cookies, brownies, and beverages to small local shops. The selling price per brownie is $1.20 and the variable cost is $0.80. The principal of an elementary school asked Windsor to provide 10 dozen brownies for its spring picnic. The principal wants to buy the brownies at Windsor's cost. Unlike with regular sales, each special order brownie must be delivered in a plastic container to protect it from dust. The containers cost is $0.05 each. The brownies can be prepared ahead of time when workers are not busy. Under the general decision rule for special orders, what is the minimum price per brownie that Windsor's management should accept? (Round all entries to 2 decimal places, e.g. 5.75.) Price $ per brownie LINK TO TEXT LINK TO TEXT If the principal can pay no more than $0.85 per brownie, should CC take the order?

Answer 1

The variable cost per brownie for special order is = $0.80 + $0.05 = $0.85 per brownie

Price $0.85 per brownie.

Yes. The order can be taken because it there is no loss as the variable costs are covered with $0.85