HST Limited manufactures Chocolate bars from Russet potatoes. They are sold to neighborhood restaurants. The company manufactures French fries using a sole production collection that operates eight several hours per day. The potatoes are ordered and stored in suitable warehouses from which they are distributed over a first-in first-out (FFO) basis. The production of French fries requires a number of techniques. They are: cleaning, sorting, damaged, manual inspection, cutting, equipment inspection, blanching, drying, frying, draining, freezing, and presentation (Beijing Time Progress Development Co. Limited 2002). If they are packed they can be moved to the cold storage space of the warehouse. In order to ensure that sufficient done goods are in stock the potatoes purchased in any month is usually equal to the latest period's sale plus twenty-five per cent from the following month's sale. Product sales commission can be paid for a price of 8% on revenue. This is paid out in the next month.
HST's goal is to breakeven every month. The company is currently selling more than enough 10lb bags of Fries to do this. Development may be important to meet the needs of consumers. However , at this moment there is no major demand French fries made from Russet potatoes. The company is going to purchase one other machine to generate French fries made from Idaho potatoes. This is required as the larger food restaurants prefer that brand. The need for HST's product can be greater and sales can be steadier. The months through which demand was higher are months by which Idaho potatoes were scarce.
The following desk shows the calculation of the variable expense of French fries, the kind of mark-up as well as the selling price every unit
Calculations: Variable expense per 10lbs of Fries
Direct materials cost
|В |В |Quantity |unit cost ($) |Cost ($) |Total | |Potato (lbs) |В |12 |0. 1 |1. 2 |В | |Vegetable oil (gallons) |В |0. 1 |2 |0. two |1. 4 | |В |В |В |В |В |В | |Direct labor |В |0. 03 |8 |0. 24 |0. twenty four | |Total direct costs |В |В |В |В |1. 64 | |В |В |В |В |В |В | |Manufacturing overheads |В |В |В |В |В | |Utilities |В |В |В |0. you |В | |indirect supplies |В |В |В |0. 05 |В | |indirect labor |В |В |В |0. a couple of |0. 35 | |В |В |В |В |В |В | |Operating bills |В |В |В |В |В | |Sales percentage |В |В |В |0. 08 |В | |Transportation cost |В |В |В |0. '07 |0. 15 | |Total variable expense per 10lb French fries |В |В |2. 14 | |В |В |В |В |В...