Answer:
a) Total cost for making and buying the cookies = $900
b) Yes, she should continue to buy the cookies
Explanation:
Number of meals of order received = 300 meals
<u>Relevant cost:</u>
Variable cost per meal produced =
(cost of meal produced - Gross product)/Annual contribution margin
Variable cost per meal = (13500 - 4500)/3000
Variable cost per meal = 9000/3000
Variable cost per meal = $3
Total cost = cost per meal * number of meals
Total cost = 300 * 3 = $900
Total cost for making and buying the cookies = $900
b) Should Mel continue to buy the cookies?
Selling price = $3.50
Relevant cost = $3.00
Profit per meal from special request = $3.50 - $3.00
Profit per meal from special request = $0.50
Since she is making a profit of $0.50 per meal, she should continue to buy the cookies
