Question

Mac, a fast-food restaurant, serves fried chicken, fried fish, and French fries. The managers have estimated the costs of a batch of fried chicken for KC's all-you-can-eat Friday Fried Fiesta. Each batch must be 100 pieces. The chicken is precut by the chain headquarters and sent to the stores in 10-piece bags. Each bag costs $2. Preparing a batch of 100 pieces of chicken with KC's special coating takes one employee two hours. The current wage rate is $8 per hour. Another cost driver is the cost of putting fresh oil into the fryers. New oil, costing $4, is used for each batch. Round answers to two decimal places, when applicable. (a) Determine the cost of preparing one batch of 100 pieces. (b) If management projects that it will sell 300 pieces of fried chicken, determine the total batch and unit costs. Batch cost $ Unit cost $ (c) If management estimates the sales to be 350 pieces, determine the total costs. (d) How much will the batch costs increase if the government raises the minimum wage to $10 per hour? (e) If management decided to reduce the number of pieces in a batch to 50, determine the cost of preparing 350 pieces. Assume that the batch would take half as long to prepare, and management wants to replace the oil after 50 pieces are cooked.

Answer 1

a) Chicken (10 bags x $2 bag) = $20

Wages (2 hours x $8 per hour) = $16

Fresh oil = $4

Total batch cost = $40

b) Batch costs (3 batches x $40/batch)= $120

Unit costs ($120 / 300 units) = 0.4 per unit

c) Total cost of estimate (4 batches* x 40)= $160

*With batch size of 100 pieces you would need 4 batches in order to obtain350 pieces

d) It would increase $2 per hour x 2.00 hours= $4.00

e)

Chicken (7 bags x $2 bag) = $14

Wages (1 hours x $8 per hour) =$8

Fresh oil =$4

Total batch cost = $ 26

350 pieces / 50 pieces per batch= 7 batches

Total cost (7 batches x $26)= $182