Exhibit 3.3 The Following Questions Are Based on This Problem and Accompanying

question 31

Multiple Choice

Exhibit 3.3
The following questions are based on this problem and accompanying Excel windows.
Jack's distillery blends scotches for local bars and saloons. One of his customers has requested a special blend of scotch targeted as a bar scotch. The customer wants the blend to involve two scotch products, call them A and B. Product A is a higher quality scotch while product B is a cheaper brand. The customer wants to make the claim the blend is closer to high quality than the alternative. The customer wants 50 1500 ml bottles of the blend. Each bottle must contain at least 48% of Product A and at least 500 ml of B. The customer also specified that the blend have an alcohol content of at least 85%. Product A contains 95% alcohol while product B contains 78%. The blend is sold for $12.50 per bottle. Product A costs $7 per liter and product B costs $3 per liter. The company wants to determine the blend that will meet the customer's requirements and maximize profit.
-Refer to Exhibit 3.3. What formula should be entered in cell E5 in the accompanying Excel spreadsheet to compute total cost?

• A) =B4*C4+B5*C5
• B) =SUMPRODUCT(B4:C4,B5:C5)
• C) =SUM(B5:C5)
• D) =SUM(E8:E10)

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Definitions:

Markup

The difference between the cost of a product or service and its selling price, expressed as a percentage over the cost.

Absorption Costing

A calculation technique in which the cost of a product is determined by including all costs associated with manufacturing, including direct materials, direct labor, as well as variable and fixed overhead costs.

Cost-plus Pricing

A pricing strategy where a fixed percentage is added to the total cost of producing a product to determine its selling price.

Return on Investment

A measure of performance that evaluates the efficiency or profitability of an investment relative to its cost.