Reference no: EM132922065

Question - The Echo Bakery has established a local market for their specialty pita chips. The chips are made using zaatar spice following a family recipe, which is a carefully guarded secret, and they are distributed through carefully selected retailers. The Echo Bakery is producing the chips at full capacity to satisfy strong demand. They are unable to produce more chips without making a substantial investment to obtain more space and equipment. Their marketing budget for the past month called for them to sell to their retailers 2,000 bags of the smaller size at $3.00 per bag and 600 bags of the larger size at $6.50 per bag. Echo Bakery actually produced and sold 1,200 bags of the smaller sized bags for $3.00, and 250 of the larger sized bags for $6.50. The reduced volumes were caused by an oven that failed and was out of service for almost two weeks. The oven is old and unreliable, and parts are difficult to find. Because of the reduced volume of production, total direct costs for ingredients were $800 lower than they would have been if production goals had been met. Also, because of the lower volume of output, Echo was able to reduce delivery costs by $430. There is no guarantee that the oven will not fail again in the future. The owners are weighing the cost of the lost profit against the cost of purchasing a new oven. Compute the profit that was lost due to the oven failure which caused Echo to fall short of their production goals.