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RanchStyle Foods is a start$-$up company based in Ghana. The President and CEO of the company

is based in the United States of America. However, he frequently trips to Ghana to ensure that

the company operates as planned. RanchStyle Foods started as a retailer of corn chips produced

in the United States and exported to Ghana. RanchStyle purchases a bag of corn chips in the

United States at $$1\mathrm{.}50.$ And sells the same at $$2\mathrm{.}50.$ A box of chips packaged for export to Ghana

from the United States contains $120$ bags and the freight charge for the export is $$100$ and the

import duty is $$30.$ RanchStyle usually exports $10$ boxes at a time.

Over time, the CEO determined it would be a better business model if the chips were produced in

Ghana, and the international freight charges eliminated. He thought that the main resource for the

chips, corn, could be sourced at a lower cost. However, he would have to import the equipment

from either the United States or China. He would have to purchase a piece of land and put up a

building that would house the equipment for production. RanchStyle targets a monthly profit of

$$10,000.$

The cost of land is $$20,000.$

The factory building would cost $$25,000$

The equipment cost including freight, customs charges, and installation would cost $$80,000.$

In addition to these costs, RanchStyle estimates the following;

Utility charges per month $$200$

Factory manager salary per month $$320$

Factory workers wages per month per person $$120$

Advertising cost paid per month $$300$ for the next six months

Cost of $25-$pound bag of corn is $$20$

Canola oil $$23$ per gallon

Miscellaneous variable input for production per month $$20$

RanchStyle uses $15$ of the $25-$pound corn bags, and $6$ gallons of Canola oil for production per

month.

RanchStyle produces a minimum of $1500$ bags of corn chips per month

The company would determine its depreciation using the straight$-$line depreciation method for

both its equipment and factory building.

RanchStyle wants to determine the following;

$1.$ Fixed cost per month

$2.$ How much should RanchStyle sell each bag of chips

$3.$ Using the selling price determined in #$2.$ Calculate the contribution margin per month

$4.$ How many bags of corn chips must RanchStyle produce to break even in a month

$5.$ Develop the variable and absorption operating income statements

$6.$ Would using Activity Based Costing for this operation make sense?

$7.$ Perform a make or buy analysis. Which do you recommend?

$8.$ Develop the sales, production, direct materials, direct labor, payables, MOH, and cash

budgets for a month of operations with the following information:

a$.$ Production requires $10\%$ of the next month$$s sales in ending inventory

b$.$ Direct materials require $20\%$ of the next month$$s production in ending inventory

c$.$ Payables are paid in the month following receipt of the invoices

d$.$ Beginning cash balance is $1$ full month$$s expenses, ending cash balance must be

no less than $$5,000.$

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