Question

Mercia Chocolates produces gourmet chocolate products with no preservatives. Any production must be sold within a few days, so producing for inventory is not an option. Mercia's single plant has the capacity to make 100,000 packages of chocolate annually. Currently, Mercia sells to only two customers: Vern's Chocolates (a specialty candy store chain) and Mega Stores (a chain of department stores). Vern's orders 55,000 packages and Mega Stores orders 25,000 packages annually. Variable manufacturing costs are $30 per package, and annual fixed manufacturing costs are $740,000. Required: What cost per package should the cost system report? (Round your intermediate calculations and final answers to 2 decimal places.) Cost per package at capacity Cost per package at demand

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and format. For detailed answer refer to the supporting sheet.

DE Answer 3 Part 1) 4 Cost Per Package at Capacity 5 = variable cost + (fixed manufacturing cost / Capacity in terms of packages) 6 = 30 +(740000/100000) 7 = 30+7.4 8 = $ 37.4 12 V 10 Part 2) 11 Cost Per Package at demand = variable cost + (fixed manufacturing cost / Demand of packages) 13 = 30 +(740000/(55000+25000)) 14 = 30+9.25 15 = $ 39.25 16 17 Thus the final answer is 18 Cost Per package at capacity 37.40 19 Cost Per package at demand 39.25 20