Question

KC, a fast-food restaurant, serves fried chicken, fried fish, and French fries. The managers have estimated the costs of a batch of fried chicken for KC's all-you-can-eat Friday Fried Fiesta. Each batch must be 100 pieces. The chicken is precut by the chain headquarters and sent to the stores in 10-piece bags. Each bag costs $3. Preparing a batch of 100 pieces of chicken with KC's special coating takes one employee two hours. The current wage rate is $8 per hour. Another cost driver is the cost of putting fresh oil into the fryers. New oil, costing $5, is used for each batch.

(a) Determine the cost of preparing one batch of 100 pieces.
(b) If management projects that it will sell 300 pieces of fried chicken, determine the total batch and unit costs.

(c) If management estimates the sales to be 250 pieces, determine the total costs.

(d) How much will the batch costs increase if the government raises the minimum wage to $10 per hour?

(e) If management decided to reduce the number of pieces in a batch to 50, determine the cost of preparing 250 pieces. Assume that the batch would take half as long to prepare, and management wants to replace the oil after 50 pieces are cooked.

Answer 1

SOLUTION

(A)

Particulars	Amount ($)
Cost of chicken bags ($3*10)	30
Special coating expense ($8*2)	16
Cost of oil	5
Total cost	51

Therefore, total cost of preparing one batch of 100 pieces is $51.

(B)

Particulars	Amount ($)
Cost of chicken bags ($3*30)	90
Special costing expense (3*2*$8)	48
Cost of Oil	15
Total cost	153
Unit cost ($153/300)	0.51

Therefore, total cost is $153 and unit cost is $0.51 per piece.

(C)

Particulars	Amount ($)
Cost of chicken bags ($3*30)	90
Special coating bags ((2*2*$8)+(1*1*$8))	40
Cost of oil	15
Total cost	145

Therefore, total cost of selling 250 pieces is $145.

(D) Increase in batch cost = ($10-$8) * Number of hours

= $2 * 2 = $4 per batch

Therefore, increase in batch cost is $4 per batch.

(E)

Particulars	Amount ($)
Cost of chicken bags ($3 *5)	15
Special coating expense (1 * $8)	8
Cost of oil	5
Total batch cost	28
Total cost ($28 * 5)	140

Number of batches = Total pieces / Piece per batch

= 250 / 50 = 5 batches

Therefore, the batch cost of preparing 250 pieces is $28. Total cost is $140.