Pierre & Sons is a baked-goods manufacturing firm. Pierre has two main divisions: Packaged Mixes and Finished Desserts. The Finished Desserts division is considering purchasing the mix for its cakes from an outside supplier.
The Packaged Mixes department incurs the following costs for each batch of cake mix:
In addition to the cost of the cake mix, the Finished Desserts Department would incur the following costs for each batch of cakes:
Currently, the Packaged Mixes department has excess capacity. Peterson currently sells the mix for $500 per batch. The Finished Desserts department is able to purchase the mix for $350 from an outside supplier. The finished cakes from each batch will sell for a total of $1,000.
Based on the decision that will maximize the overall benefit to Peterson & Sons, what is the contribution margin per batch that can be realized by the Finished Desserts department?

Question

Pierre & Sons is a baked-goods manufacturing firm. Pierre has two main divisions: Packaged Mixes and Finished Desserts. The Finished Desserts division is considering purchasing the mix for its cakes from an outside supplier.
The Packaged Mixes department incurs the following costs for each batch of cake mix:
  In addition to the cost of the cake mix, the Finished Desserts Department would incur the following costs for each batch of cakes:
  Currently, the Packaged Mixes department has excess capacity. Peterson currently sells the mix for $500 per batch. The Finished Desserts department is able to purchase the mix for $350 from an outside supplier. The finished cakes from each batch will sell for a total of $1,000.
Based on the decision that will maximize the overall benefit to Peterson & Sons, what is the contribution margin per batch that can be realized by the Finished Desserts department?

Quizplus · Accepted Answer

The Answer of Pierre & Sons is a baked-goods manufacturing firm. Pierre has two main divisions: Packaged Mixes and Finished Desserts. The Finished Desserts division is considering purchasing the mix for its cakes from an outside supplier.
The Packaged Mixes department incurs the following costs for each batch of cake mix:
  In addition to the cost of the cake mix, the Finished Desserts Department would incur the following costs for each batch of cakes:
  Currently, the Packaged Mixes department has excess capacity. Peterson currently sells the mix for $500 per batch. The Finished Desserts department is able to purchase the mix for $350 from an outside supplier. The finished cakes from each batch will sell for a total of $1,000.
Based on the decision that will maximize the overall benefit to Peterson & Sons, what is the contribution margin per batch that can be realized by the Finished Desserts department?

Pierre & Sons Is a Baked-Goods Manufacturing Firm