Question

has asked Jordon and Taylor to consider making Extra Attack Brownies and Nutty Attack Brownies, in addition to Chocolate Attack Brownies. The selling price to Yumminess would be $12 and $14.50 per tin, respectively, compared to the original $10 for Chocolate Attack Brownies. In addition to the current fixed common cost of $79,000, you have figured the additional costs to manufacture each new recipe. For 50,000 tins of Extra Attack Brownies, additional variable costs would be $75,000. For 20,000 tins of Nutty Attack Brownies, additional variable costs would be $100,000. Remember that the contribution margin for Chocolate Attack Brownies per tin is $1.995.

Chapter 20 Questions:

Answer questions 1 and 2 as a sell now or process further scenario. Question 3 is sales mix with a weighted-average contribution margin.

1. What would be the incremental income/loss per tin for manufacturing Extra Attack Brownies? (If a net loss, use “( )” or “-“ in your answer.) (4 points)

2. What would be the incremental income/loss per tin for manufacturing Nutty Attack Brownies? (If a net loss, use “( )” or “-“ in your answer.) (4 points)

3. If Jordan and Taylor sold 100,000 tins of Chocolate Attach Brownies, 70,000 tines of Extra Attack Brownies, and 30,000 tins of Nutty Attack Brownies to Yumminess, what would be the weighted-average contribution margin per tin. (7 points)

Answer 1

1) Extra Attack Brownies - Profit Calculation

Additional Variable Cost = $75000 for 50000 units of Extra Attack Brownies, so variable cost per tin will be(75000/50000) = 1.5

Additional Contribution per Extra Revenue = $12-$10 = $2

Additional Contribution per Extra Attack Brownies = Incremental Revenue - Incremental Variable Cost

= $2 - $1.5 = $0.5

2) Nutty Attack Brownies - Profit Calculation

Additional Variable Cost = $100000 for 20000 units of Nutty Attack Brownies, so variable cost per tin will be(100000/20000) = $5

Additional Contribution per Extra Revenue = $14.5-$10 = $4.5

Additional Contribution per Nutty Attack Brownies = Incremental Revenue - Incremental Variable Cost

= $4.5 - $5 = -$0.5

3).

New Contribution Of The Extra Attack Brownies = Existing Contribution + Additional Contribution

= $1.995 + $0.5 = $2.495

New Contribution Of The Nutty Attack Brownies = Existing Contribution + Additional Contribution

= $1.995 - $0.5 = $1.495

Contribution Of Choclate Attach Brownies = $1.995 (Given)

Weighted Average Total Contribtion per unit = Weighted Average Contribution \ Total Number Of Tins

Item	Contribution	Bottles	Total
Choclate Attach Brownies	1.995	100000	199500
Extra Attack Brownies	2.495	70000	174650
Nutty Attack Brownies	1.495	30000	44850
Total	-----	200000	419000

Therefore Weighted Average Margin = 419000 / 200000. = 2.095 contribution per tin