Question

Assume that MTA Sandwiches sells sandwiches for $3.30 each. The cost of each sandwich follows. Materials Labor Variable overhead Fixed overhead ($21,090 per month, 22,200 units per month) Total costs per sandwich $0.80 0.70 0.40 0.95 $2.85 One of MTA's regular customers asked the company to fill a special order of sandwiches at a selling price of $2.35 each for a fund- raising event sponsored by a social club at the local college. MTA has capacity to fill it without affecting total fixed costs for the month. MTA's general manager was concerned about selling the sandwiches below the cost of $2.85 and has asked for your advice. Required: a. Prepare a schedule to show the impact on MTA's profits of providing 500 sandwiches in addition to the regular production and sales of 22,200 sandwiches per month. b. Based solely on the data given, what is the lowest price per sandwich at which the special order can be filled without reducing MTA's profits? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a schedule to show the impact on MTA's profits of providing 500 sandwiches in addition to the regular production and sales of 22,200 sandwiches per month. (Select option "higher" or "lower", keeping Status Quo as the base. Select "none if there is no effect.) Status Quo 22,200 Units Alternative 22,700 Units Difference Sales revenue

Answer 1

a)

	22,200 Units	22,700 units	Difference
Sales revenue	22,200*$3.30 = $73,260	(22,200*$3.30) + (500*$2.35) = $74,435	$1,175
Less: Variable cost
Materials	22,200*$0.80 = $17,760	22,700*$0.80 = $18,160	$(400)
Labour	22,200*$0.70 = $15,540	22,700*$0.70 = $15,890	$(350)
Variable overhead	22,200*$0.40 = $8,880	22,700*$0.40 = $9,080	$(200)
Total variable cost	$42,180	$ 43,130	$(950)
Contribution margin	$31,080	$31,305	$225
Less: Fixed costs	$21,090	$21,090	$    -
Operation profit	$9,990	$10,215	$540

b) lowest price
material	0.80
labor	0.70
variable overhead	0.40
lowest price per sandwich	1.9

I hope it is useful to u if u have any doubt plz comment and plz give me up thumb