Grammy Girl products has two divisions Bones and Biscuits both of which usually have independence in sourcing and pricing decisions. There is an unlimited supply of raw bones. Biscuits manufactures amongst other items a specialty product called BisBne formula requires 70% Bone meal and 30 % cereal per pound plus a dollop of mat flavoring. Bison is usually sold in 20 pound cases and processed bones in 5 pound packs cost and sales pricing dat appears below. Sales price per case $20; Raw bones per pound $1.50; Processing per pound $.80; Packaging $.75; Overhead per case (pack) 40% fixed $7.00 In lieu of its normal processing, Bones sometimes grinds raw bones into bone meal (grinding cost $.05per pound) When bone meal is sold to Biscuits bulk packaging is used which costs $1 per 100 pound sack when sod to other firms, it is packed in 50 pound containers costing $3 each. Bones prices the container product at $180 Biscusits just received an order for 800 cases of one of its specialty products, BisBone and is contemplating purchasing bone meal from its sister division. If Bones is operating below capacity what is the minimum price that it should quote Biscuits per sack of bone meal to maximize GGP's profit? I know the answer is Raw bones $1.50; Grinding $.05 Variable overhead per pound $.84 =$2.39 plus Bulk package $1.00 = Minimum price below capacity = $240 How did they get the $.84 Variable overhead per pound

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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Grammy Girl products has two divisions Bones and Biscuits both of which usually have independence in sourcing and pricing decisions. There is an unlimited supply of raw bones. Biscuits manufactures amongst other items a specialty product called BisBne formula requires 70% Bone meal and 30 % cereal per pound plus a dollop of mat flavoring. Bison is usually sold in 20 pound cases and processed bones in 5 pound packs cost and sales pricing dat appears below. Sales price per case $20; Raw bones per pound $1.50; Processing per pound $.80; Packaging $.75; Overhead per case (pack) 40% fixed $7.00 In lieu of its normal processing, Bones sometimes grinds raw bones into bone meal (grinding cost $.05per pound) When bone meal is sold to Biscuits bulk packaging is used which costs $1 per 100 pound sack when sod to other firms, it is packed in 50 pound containers costing $3 each. Bones prices the container product at $180 Biscusits just received an order for 800 cases of one of its specialty products, BisBone and is contemplating purchasing bone meal from its sister division. If Bones is operating below capacity what is the minimum price that it should quote Biscuits per sack of bone meal to maximize GGP's profit? I know the answer is Raw bones $1.50; Grinding $.05 Variable overhead per pound $.84 =$2.39 plus Bulk package $1.00 = Minimum price below capacity = $240 How did they get the $.84 Variable overhead per pound

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