Question - Loco for Cocoa, LLC processes cocoa beans into two products: chocolate powder and chocolate syrup. Demand for chocolate powder is 15,000 units; demand for chocolate syrup is 20,000 units. Loco only has 100,003 beans on hand and will not be able to obtain any more for several weeks. Each bean costs $0.50 from the supplier. Fixed costs are $20,000 per period. The following information is available for each unit of product:
|
Powder
|
Syrup
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|
Sales Price
|
$47.00
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$65.00
|
|
Direct Material (consists only of cocoa beans)
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2.50
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4.00
|
|
Direct Labor
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8.00
|
9.00
|
|
Other Variable Costs
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1.50
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4.00
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What is the highest additional amount Loco would be willing to pay for a cocoa bean?
A. $4.00
B. $6.50
C. $7.00
D. $6.00
E. $7.50