Reference no: EM132560594

Cathy and Tom's Specialty Ice Cream Company operates a small production facility for the local community. The facility has the capacity to make 16,800 gallons of the single flavor, GUI Chewy, annually. The plant has only two customers, Chuck's Gas & Go and Marcee's Drive & Chew DriveThru. Annual orders for Chuck's total 8,400 gallons and annual orders for Marcee's total 4,200 gallons. Variable manufacturing costs are $.80 per gallon, and annual fixed manufacturing costs are $25,200.

The ice cream business has two seasons, summer and winter. Each season lasts exactly six months. Chuck's orders 4,200 gallons in the summer and 4,200 gallons in the winter. Marcee's is closed in the winter and orders all 4,200 gallons in the summer.

In discussing their business, Cathy and Tom realize that there are really three seasons instead of two, the third being the fall and spring (as a combined season). Each of the three seasons lasts exactly four months. They also know that Marcee's opens in mid-spring and closes in mid-fall.

Cathy and Tom check the order patterns and see the following demand (in gallons) in each of the three seasons:

                                                Winter Fall and                 Spring                                Summer               Total

Chuck's                                 2,800                             2,800                       2,800            8,400

Marcee's                                    0                                   1,400                        2,800           4,200

Total                                        2,800                                4,200                        5,600           12,600

Required:

Question 1: Design the cost system for Cathy and Tom showing the capacity costs and capacity in each season. (Round "Fixed cost" and "Variable cost" to 2 decimal places.)