Requirement (a) :
Current sales = 1600 meals per day
Current Fixed expense = $2,000
Average fixed cost per meal =2000/1600 = $ 1.25 per meal
Variable cost per meal =$4.0 per meal
Total average cost per meal:
=1.25+4
=5.25 per meal
Requirement(b):
Total order price for 30 meals = $135
per meal revenue from girl scouts = 135/30 = $ 4.50 per meal
Current average cost per meal | $5.25 |
Per meal revenue from Girl Scouts | $4.50 |
Loss per meal | $0.75 |
Requirement(c) :
Restaurant was earning :
Price per meal $.7.00
Less.
Variable cost ($4.00)
Contribution $3.00 per meal
Now, offer recieved for 300 meals @4.90 per meal which gives a contribution @ $0.90 per meal.(4.90-4)
As the total capacity of restaurant owner is 1650 meals a month, if he has to accept the offer, the idle capacity of 50 meals (1650-1600) are used and also it must forgo its normal sales of 250 meals (300-50).
Daily contribution from special order((4.90-4)*300) | 270 |
Daily opportunity cost((7-4)*250) | 750 |
Net advantage (disadvantage) | -480 |
Net disadvantage with acceptance of offer= - $480
Therefore, the offer should not be accepted.
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