Concept explainers
Assigning Capacity Costs
Mercia Chocolates produces gourmet chocolate products with no preservatives. Any production must be sold within a few days, so producing for inventory is not an option. Mercia’s single plant has the capacity to make 90,000 packages of chocolate annually. Currently, Mercia sells to only two customers: Vern’s Chocolates (a specialty candy store chain) and Mega Stores (a chain of department stores). Vern’s orders 45,000 packages and Mega Stores orders 15,000 packages annually. Variable
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What cost per package should the cost system report? Why? If you need more information to answer the question, describe it.
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