### Decision-Making in Biscuit Production: Case Study of Almond Delites**Background:**Almond Delites manufactures various types of biscuits. FMF Biscuits Ltd has proposed to Almond Delites an offer to sell them its top-selling biscuit at a price of $22,000 for 20,000 units. Below are the costs associated with the production of 20,000 units of almond biscuits by Almond Delites:| Cost Component | Amount ||--------------------------|------------|| Direct materials | $12,000 || Direct labour | $ 5,000 || Manufacturing overhead | $ 8,000 || **Total cost** | **$25,000**|**Additional Information:**- The manufacturing overhead includes $2,000 of variable costs, with the remaining allocated to fixed costs.- Assume that 40% of the fixed costs would be avoidable if Almond Delites decides to purchase the biscuits externally rather than produce them internally.#### Analysis Required:1. **Cost Comparison:** Determine whether Almond Delites should make or buy the almond biscuits: **ANSWER b (i):** [Provide space for calculation and answer]2. **Qualitative Factors:** Identify the qualitative factors that Almond Delites should consider before making a decision: **ANSWER b (ii):** [Provide space for qualitative factors considerations]#### Detailed Explanation:The manufacturing overhead of $8,000 is divided into variable and fixed components. $2,000 is identified as variable costs, and the remaining $6,000 are fixed costs. If 40% of these fixed costs are avoidable, it equals $2,400.Therefore, the relevant costs for deciding whether to make or buy the biscuits should be calculated by subtracting the avoidable fixed costs from the total internal production costs:- Variable Costs: $2,000- Fixed Costs (avoidable): $2,400The decision should then be based on the comparison of these relevant costs with the cost proposed by FMF Biscuits Ltd.#### Graph/Diagram Explanation:This example does not contain visual graphs or diagrams; however, a breakdown of costs in a tabular form has been provided to facilitate clear understanding.---**Note to Students:**Understand that while numerical cost analysis is crucial, qualitative factors such as quality control, supplier reliability, production capabilities, and strategic goals should also be considered in decision-making

In decision making process all relevant cost related to decision should be considered. Irrelevant…

Answered: b) Almond Delites manufactures various…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Almond Treats manufactures various types of cereals that feature almonds. Acme Cereal Company has approached Almond Treats with a proposal to sell the company its top selling cereal at a price of $22,000 for 20,000 pounds. The costs shown are associated with production of 20,000 pounds of almond cereal: Direct material $13,000 Direct labor 5,000 7,000 Manufacturing overhead Total $25,000 The manufacturing overhead consists of $2,000 of variable costs with the balance being allocated to fixed costs. PLEASE NOTE: Costs per unit are rounded to two decimal places and shown with "$" and commas as needed (i.e. $1,234.56). All dollar amounts are rounded to whole dollars and shown with "$" and commas as needed (i.e. $12,345). 1. What is Almond Treats' relevant cost? 2. What does Acme's offer cost? 3. If Almond Treats accepts the offer, what will the effect on profit be? o Incremental dollar amount = . Increase or Decrease? Please note: Your answer is either "Increase" or "Decrease" - capital…
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Almond Treats manufactures various types of cereals that feature almonds. Acme Cereal Company has approached Almond Treats with a proposal to sell the company its top selling cereal at a price of $22,000 for 20,000 pounds. The costs shown are associated with production of 20,000 pounds of almond cereal: Direct material $13,100 Direct labor 5,000 Manufacturing overhead 6,900 Total $25,000 The manufacturing overhead consists of $2,200 of variable costs with the balance being allocated to fixed costs. A. Calculate the differential cost of Acme? B. Should Almond Treats make or buy the almond cereal? Make v Feedback
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a) Almond Delites manufactures various types of biscuits. FMF Biscuits Ltd has approached Almond Delites with a proposal to sell the company its top-selling biscuit at a price of $22 000 for 20 000 units. The costs shown are associated with the production of 20 000 units of almond biscuits: Direct materials: $12,000 Direct labor: $5,000 Variable overhead: $8,000 Fixed overhead: $25,000 The manufacturing overhead consists of $2 000 of variable costs, with the balance being allocated to fixed costs. Assume that 40% of the fixed costs would be avoidable if the almond biscuits were purchased externally rather than produced internally. Required: i)Should Almond Delites make or buy the almond biscuit? ii) What qualitative factors should Almond Delites consider before making its decision?
Almond Treats manufactures various types of cereals that feature almonds. Acme Cereal Company has approached Almond Treats with a proposal to sell the company its top selling cereal at a price of $21,800 for 20,000 pounds. The costs shown are associated with production of 20,000 pounds of almond cereal: Direct material $13,000 Direct labor 5,100 Manufacturing overhead 7,100 Total $25,200 The manufacturing overhead consists of $2,200 of variable costs with the balance being allocated to fixed costs. A. Calculate the differential cost of Acme? $fill in the blank 1 B. Should Almond Treats make or buy the almond cereal? Make or buy?
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