Classic Problems Problem 8.1: Outland Bakery tried using gluten-free flour in its three most popular cookies. After several attempts and a lot of inedible cookies, the company perfected new recipes that yield delicious gluten-free cookies. The costs of producing a batch of 100 cookies are as follows: Chocolate Chip Oatmeal Sugar Raisin Sales price $130 $125 $120 Variable cost $81 $86 $78 Fixed cost 18 15 20 Pounds of flour 2.5 2.5 2 Sales mix 40% 25% 35% Required: Based upon market research, Outland's CEO believes the company can sell a total 40,000 batches of cookies. The company's flour supplier, however, will only be able to provide 50,000 pounds of flour. How many batches of each type of cookie should the company bake? Compute the company's TOTAL contribution margin? Problem Super Socks currently produces 3 soc lines and now considers a new sock For new line, the company expects to sell 20,000 pairs at a sale price of $10 per pair. Variable product costs will be $6.50 per pair and fixed overhead will be $1.60 per pair. Half of the fixed overhead is directly traceable to the new sock line. To promote the socks, the company proposes commissions of $0.50 per pair and a $10,000 per month advertising campaign. The new line will be allocated $25,000 in fixed corporate costs. Required: Determine the estimated impact of the new sock line on Super Socks company-wide profitability Problem 8.3: Vistas produces vinyl replacement windows. The company has Total capacity of 500,000 windows. Budgeted production is 450,000 windows per year, a quantity that has been constant over the past three years. Based on the budget, the accounting department has calculated the following unit costs for the windows: Direct materials $ 40 Direct labor 18 Manufacturing overhead 20 Selling and administrative 14 The company's budget includes $5,400,000 in fixed overhead and $3,150,000 in fixed selling and administrative expenses. Windows sell for $150 each. A 2% distributor's commission is included in the selling and administrative expenses. Required: ScandiHomes, Finland's second largest homebuilder, has approached Vistas about a special order of 75,000 windows. Given the size of the order, ScandiHomes has requested a 40% volume discount on Wilson's normal selling price. Should Wilson grant ScandiHomes' request?