Peter’s Grocery is an Italian market that sells imported meats and cheeses. The company is thinking of using a portion of their store space to sell ready-made sandwiches with ingredients from the store. The main components of the sandwiches are 100 grams of salami (meat), 1 slice of provolone (cheese) and one bun. The salami sells for $2 per 100 grams and costs the company $0.75 per 100 grams. Provolone sells for $0.50 per slice and costs the store $0.35 per slice. The buns cost the company $2.40 per dozen to make, and sell for $4.80 per dozen. The company expects it can sell the sandwiches for $4 each. The labour costs associated with making a sandwich are $0.25 and the variable overhead is expected to cost $0.75 per sandwich. Required: Should the company introduce the new sandwich item? Determine the net dollar advantage or disadvantage of selling the sandwich as compared to selling the meat, cheese and bun separately.
Peter’s Grocery is an Italian market that sells imported meats and cheeses. The company is thinking of using a portion of their store space to sell ready-made sandwiches with ingredients from the store. The main components of the sandwiches are 100 grams of salami (meat), 1 slice of provolone (cheese) and one bun. The salami sells for $2 per 100 grams and costs the company $0.75 per 100 grams. Provolone sells for $0.50 per slice and costs the store $0.35 per slice. The buns cost the company $2.40 per dozen to make, and sell for $4.80 per dozen. The company expects it can sell the sandwiches for $4 each. The labour costs associated with making a sandwich are $0.25 and the variable overhead is expected to cost $0.75 per sandwich.
Required:
Should the company introduce the new sandwich item?
Determine the net dollar advantage or disadvantage of selling the sandwich as compared to selling the meat, cheese and bun separately.
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