Question

1. In addition to flowers and plants, Fannie’s Florist sells candy bouquets. Fannie currently buys candy bouquets from a local distributor for $8 each and sells the bouquets for $10 each. She sells 300 candy bouquets per month for eight months of the year, 500 bouquets per month for three months, and about 1,000 bouquets during February around Valentine’s Day. Her daughter has suggested that they could produce their own candy bouquets. After investigating the costs, they discovered that candy will cost them an average of $1 per candy bouquet. In addition, it will cost about $3 per candy bouquet to pay people to assemble the candy bouquet. Also, it will cost $2,000 per month to rent a building to store and produce the candy bouquets.

What is the annual net cost of buying candy bouquets from the distributor?

What is the annual net cost of making the candy bouquets themselves?

Should Fannie’s Florist produce or buy the candy bouquets?

Are the selling price and total revenue received from customers relevant to this decision?

Answer 1

ANswer to Q1

Annual NEt Cost Buying Candy Bouquets from distributor:

Number of units sold: 300*8 +500*3+ 1000 ; 4,900

Annual Cost ; 4,900*$8 ;$39,200

Answer to Q2

Annual Cost of making : 4,900*$1 + 4,900*$3 +$2,000 ; $21,600

Asnwer to Q3

Fannie’s Florist should produce the Candy Bouquests as it costs lesser than buying from outside.

Answer to Q4

No, because we are just talking about the cost of buying and making , no profit action involved in this.