Question

1. Philly Sandwiches Inc. has determined the following estimated production volumes for the 7” and 14” Philly cheese steak submarine.

             Production Volumes:

7”   Philly cheese steak submarine = 20,000 units

14” Philly cheese steak submarine = 25,000 units

                               There are three direct materials to be used to produce both submarines. The

                             quantities are as follow:

Direct Material	7 “ Submarine	14” Submarine
Cheese	0.3 lbs per unit	0.6 lbs per unit
Steak	0.25 lbs per unit	0.5 lbs per unit
Onions	0.1 lbs per unit	0.3 lbs per unit

In addition, the company had the following information about the materials:

	Cheese	Steak	Onions
Beginning Inventory	200 lbs	700 lbs	100lbs
Price per Pound	$2	$5	$1

1. How many pounds of cheese, steak and onions, the company must buy? (5 points)
2. How much the company will spend (total) to buy all materials it needs? (5 points)
3. If the company had budgeted to spend $65,000 to buy steak and onions, how much it is over (under) budget?                                                                  (5 points)                                                                                
4. If the conversion cost to produce a 7” submarine is $0.65 per unit, how much is the total cost per unit to produce a 7” submarine?                                     (5 points)

a	b
c	d

Answer 1

a.How many pounds of cheese, steak and onions, the company must buy?

Direct Materil	7" Submarine	For 20k units	14" Submarine	For 20K units	Total Requirement
Cheese	0.30	6,000.00	0.60	12,000.00	18,000.00
Steak	0.25	5,000.00	0.50	10,000.00	15,000.00
Onions	0.10	2,000.00	0.30	6,000.00	8,000.00

b.How much the company will spend (total) to buy all materials it needs?

Direct Materil	Total Requirement	Price per Pound	Total Price
Cheese	18,000.00	$                     2.00	$          36,000.00
Steak	15,000.00	$                     5.00	$          75,000.00
Onions	8,000.00	$                     1.00	$            8,000.00
Total			$      1,19,000.00

c.If the company had budgeted to spend $65,000 to buy steak and onions, how much it is over (under) budget?

Steak and Onions total price = $75,000 + $8,000 = $83,000

Budget = $65,000

Thus it is over budget of $18,000

d.If the conversion cost to produce a 7” submarine is $0.65 per unit, how much is the total cost per unit to produce a 7” submarine?

7" Submarine
Direct Materil	Total Requirement	Price per Pound	Total Price
Cheese	0.30	$                     2.00	$                     0.60
Steak	0.25	$                     5.00	$                     1.25
Onions	0.10	$                     1.00	$                     0.10
Conversion cost			$                     0.65
Total			$                     2.60