Famous Albert prides himself on being the Cookie King of the West. Small, freshly baked cookies are the specialty of his shop. Famous Albert has asked for help to determine the number of cookies he should make each day. From an analysis of past demand, he estimates the average demand is 2400 with standard deviation 0.5. Each dozen sells for $0.69 and costs $0.49, which includes handling and transportation. Cookies that are not sold at the end of the day are reduced to $0.29 and sold the following day as day-old merchandise. What is the optimal number of cookies to make?

Famous Albert prides himself on being the Cookie King of the West. Small, freshly baked cookies are the specialty of his shop. Famous Albert has asked for help to determine the number of cookies he should make each day. From an analysis of past demand, he estimates the average demand is 2400 with standard deviation 0.5. Each dozen sells for $0.69 and costs $0.49, which includes handling and transportation. Cookies that are not sold at the end of the day are reduced to $0.29 and sold the following day as day-old merchandise. What is the optimal number of cookies to make?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Sam's Auto Shop services and repairs a particular brand of foreign automobile. Sam uses oil filters throughout the year. The shop operates 52 weeks per year and weekly demand is 130 filters. Sam estimates that it costs $20 to place an order and his annual holding cost rate is $3 per oil filter. Currently, Sam orders in quantities of 650 filters. Calculate the total annual costs associated with Sam's current ordering policy. Total annual costs = $
The twig stands are more popular, so Bobby sells four twig stands for every one oak stand. Katie charges her husband $400 to share her booth at the craft shows (after all, she has paid the entrance fees). How many of each plant stand does Bobby need to sell to breakeven? Will this affect the number of scarves Katie needs to sell to breakeven? Explain. Bobby Arthur admired his wife's success at selling scarves at local crafts shows, so he decided to make two types of plant stands to sell at the shows. Bobby makes twig stands out of downed wood from his backyard and the yards of his neighbors, so his variable cost is minimal (wood screws, glue, and so forth). However, Bobby has to purchase wood to make his oak plant stands. His unit prices and costs are as follows: E(Click the icon to view the data.) Determine how many of each plant stand Bobby needs to sell to breakeven. Begin by computing the weighted-average contribution margin per unit. First identify the formula labels, then…
How many units does Eddie the Entrepreneur need to sell to breakeven in a day? He rents a kiosk in the mall for $300 a day. He creates artworks that cost him $47 each in materials and sells them for $100 each. He pays one of his friends $10 an hour to man the booth and he has to pay mall management 3% of his sales. The mall is open daily from 10 am to 8 pm.
Jansen Crafters has the capacity to produce 50,000 oak shelves per year and is currently selling 44,000 shelves for $32 each. Cutrate Furniture approached Jansen about buying 1,200 shelves for bookcases it is building and is willing to pay $26 for each shelf. No packaging will be required for the bulk order. Jansen usually packages shelves for Home Depot at a price of $1.50 per shelf. The $1.50 per-shelf cost is included in the unit variable cost of $27, with annual fixed costs of $320,000. However, the $1.50 packaging cost will not apply in this case.The fixed costs will be unaffected by the special order and the company has the capacity to accept the order. Based on this information, what would be the profit if Jansen accepts the special order?
avid Austin recently purchased a chain of dry cleaners in northern Wisconsin. Although the business is making a press, he could recognize a substantial increase in profits. The new press costs $15,400 to purchase and install and can press 40 shirts an hour (or 320 per day). David estimates that with the new press, it will cost $0.25 to launder and press each shirt. Customers are charged $1.10 per shirt. a. How many shirts will David have to press to break even? b If David cuts his price to $0.99 a shirt, he expects to be able to stabilize his customer base at 250 shirts per day. How long would it take to break even at the reduced price of $0.99? Should David cut his price and buy the new press?
Lois is planning to make fancy, multi-tiered wedding cakes for the next wedding season. To make the cakes, she must invest $2900 in some special baking tools. To promote her business, she also needs to spend $6265 to advertise in the newspaper. She estimates that supplies and materials for each cake will cost $690. She is planning to set the price for each cake at $925. (a) Compute the contribution margin. (b) Compute the contribution rate. (c) Compute the break-even point in units. (d) Compute the break-even point in sales dollars. (a) The contribution margin per unit is $ (Type a whole number.) (b) The contribution rate is%. (Round to two decimal places as needed.) (c) The break-even point is cakes. (Round up to the nearest unit.) (d) The break-even point in sales dollars is $. (Type a whole number.)
A dairy farmer has found that it costs $1.84 to produce each gallon of milk, and the daily fixed cost to maintain production is $345. If the farmer charges $3.29 per gallon of milk when he sells it to a large grocery store chain, how many gallons of milk does the farmer need to produce and sell to make a daily profit of $479? (Round your answer to the nearest whole number of gallons.) The farmer needs to produce and sell gallons of milk to make a daily profit of $479.
Hannah Ortega is considering expanding her business. She plans to hire a salesperson to cover trade shows. Because of compensation, travel expenses, and booth rental, fixed costs for a trade show are expected to be $10,660. The booth will be open 26 hours during the trade show. Ms. Ortega also plans to add a new product line, ProOffice, which will cost $190 per package. She will continue to sell the existing product, EZRecords, which costs $103 per package. Ms. Ortega believes that the salesperson will spend approximately 16 hours selling EZRecords and 10 hours marketing ProOffice. Required a. Determine the estimated total cost and cost per unit of each product, assuming that the salesperson is able to sell 73 units of EZRecords and 59 units of ProOffice.
Pam and Lenny’s ice cream shop charges $1.75 for a cone. Variable expenses are $0.42 per cone, and fixed costs total $2,500 per month. A "sweetheart" promotion is being planned for the second week of February. During this week, a person buying a cone at the regular price would receive a free cone for a friend. It is estimated that 625 additional cones would be sold and that 825 cones would be given away. Advertising costs for the promotion would be $170. Required: a. Calculate the effect of the promotion on operating income for the second week of February. (Do not round intermediate calculation and round your final answer to 2 decimal places.) b. Do you think the promotion should occur?multiple choice Yes No
Jason is in the furniture business. He observed increasing demand for office chairs, and strongly anticipates even better results in the next quarter. Jason decides to reconsider his production plans, and he comes up with the following production budget for the second quarter: April May June 600 units 650 units 710 units A Jason determines that every unit needs 2 hours of direct labor (DL) time. He pays $24 per hour to his daily wage workers. Considering the given information, which of the following is correct? O For the second quarter. total DL hours and total DL cost will be 3980 and $92640 respectively. O For the second quarter, total DL hours and total DL cost will be 1200 and $28800 respectively. O For the second quarter, total DL hours and total DL cost will be 3920 and $94080 respectively. O For the second quarter, total DL hours and total DL cost will be 1300 and $31200 respectively.
The Shirt Works sells a large variety of tee shirts and sweatshirts. Steve Hooper, the owner, is thinking of expanding his sales by hiring high school students, on a commission basis, to sell sweatshirts bearing the name and mascot of the local high school. These sweatshirts would have to be ordered from the manufacturer six weeks in advance, and they could not be returned because of the unique printing required. The sweatshirts would cost Hooper $21.00 each with a minimum order of 200 sweatshirts. Any additional sweatshirts would have to be ordered in increments of 50. Since Hooper’s plan would not require any additional facilities, the only costs associated with the project would be the costs of the sweatshirts and the costs of the sales commissions. The selling price of the sweatshirts would be $42.00 each. Hooper would pay the students a commission of $6.00 for each shirt sold. Required: 1. What level of unit sales and dollar sales is needed to attain a target profit of…
Fred Flingstone operates a French Fries stand at the local flee market that operates for 8 weekends through the summer. The market vendor fee is $50 per weekend, his vendor insurance is $376 for the summer and he has committed to paying a helper $150 per weekend. His variable costs are $1.58 per French Fries (This includes the cost of napkins, ketchup and salt). He plans to sell the fries for $3.50 each and he knows from experience that he can make a maximum of 200 fries each weekend. a) How many fries does he have to sell per week to break even? b) On one weekend he gets sick and cannot get to the market? What is his net loss for that weekend? c) Another french fries vendor at the market sells fries for $3.10 each. How many fries would Fred have to sell in summer at this price to break even assuming none of his costs change? d) How much would he have to change the variable costs (assuming original fixed costs) to maintain his original break even point if he sold fries at $3.00?