In response to a growing awareness of various allergies, Barb's Better Breads (BBB) developed baking mixes which contain a unique blend of gluten-free flours and starches, including almond meal, organic flax seeds and arrowroot. The breads are also baked in a preheated, heavy, lidded pan which creates a better crust and texture in gluten-free breads. BBB has been approached by a large restaurant chain to supply the bread used in restaurants throughout the region. Due to demand, almond meal is often in limited supply. Pertinent information for 3 types of bread follows:
| Sales price | $6.50 | | $5.50 | | $6.50 |
| Variable cost | 4.05 | | 3.10 | | 4.40 |
| Fixed cost | 0.90 | | 0.75 | | 1.00 |
| | | | | | |
| Total cost | 4.95 | | 3.85 | | 5.40 |
| Gross profit | $1.55 | | $1.65 | | $1.10 |
| | | | | | |
| Pounds of almond meal | 0.80 | | 0.90 | | 0.75 |
Required:
a.
Assuming no raw material constraints and unlimited demand for all 3 types of bread, what type of bread would maximize the company's contribution margin? Why?
b.
Assume that based on typical customer demand, BBB will sell 12,000 loaves of cinnamon raisin, 8,000 loaves of ciabatta, and 10,000 loaves of crusty french. What will the company's contribution margin be?
c.
BBB's almond meal supplier has announced a shortage of almond meal. As a result, BBB will only be able to purchase 20,000 pounds of almond meal. How many loaves of each type of bread should the company bake? What will the company's contribution margin be?
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