Answered: Burger Doodle is a fast-food restaurant…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 7E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...

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Question

Burger Doodle is a fast-food restaurant that processes an average of 680 food orders
each day. The average cost of each order is $6.15. Four percent of the orders are
incorrect, and only 10% of the defective orders can be corrected with additional food
items at an average cost of $1.75. The remaining defective orders have to be thrown
out.
a. Compute the average product cost.
b. In order to reduce the number of wrong orders, Burger Doodle is going to invest
in a computerized ordering and cash register system. The cost of the system will
increase the average order cost by $0.05 and will reduce defective orders to 1%.
What is the annual net cost effect of this quality-improvement initiative?
c. What other indirect effects on quality might be realized by the new computerized
order system?

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