Lecture 8 - P13-25 - candies. The candy making equipment is...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
PROBLEM 13–25 Sell or Process Further The Heather Honey Company purchases honeycombs from beekeepers for $2.00 a pound. The company produces two main products from the honeycombs—honey and beeswax. Honey is drained from the honeycombs, and then the honeycombs are melted down to form cubes of beeswax. The beeswax is sold for $1.50 a pound. The honey can be sold in raw form for $3.00 a pound. However, some of the raw honey is used by the company to make honey drop candies. The candies are packed in a decorative container and are sold in gift and specialty shops. A container of honey drop candies sells for $4.40. Each container of honey drop candies contains three quarters of a pound of honey. The other variable costs associated with making the candies are as follows: The monthly fixed manufacturing overhead costs associated with making the candies follow: The master candy maker has no duties other than to oversee production of the honey drop
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: candies. The candy making equipment is special-purpose equipment that was constructed specifically to make this particular candy. The equipment has no resale value and does not wear out through use. A salesperson is paid $2,000 per month plus a commission of 5% of sales to market the honey drop candies. The company had enjoyed robust sales of the candies for several years, but the recent entrance of a competing product into the marketplace has depressed sales of the candies. The management of the company is now wondering whether it would be more profitable to sell all of the honey rather than converting some of it into candies. Required: 1. What is the incremental contribution margin per container from further processing the honey into candies? 2. What is the minimum number of containers of candy that must be sold each month to justify the continued processing of honey into candies? Explain. Show all computations. (CMA, adapted)...
View Full Document

Page1 / 2

Lecture 8 - P13-25 - candies. The candy making equipment is...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online