Maria\'s Food Service provides meals that nonprofit organizations distribute to
ID: 2420850 • Letter: M
Question
Maria's Food Service provides meals that nonprofit organizations distribute to handicapped and elderly people. Here is her forecasted income statement for April, when she expects to produce and sell 3,000 meals:
$1.50
Fixed costs included in this income statement are $4,500 for meal production and $600 for administrative costs. Maria has received a special request from an organization sponsoring a picnic to raise funds for the Special Olympics. This organization is willing to pay $3.50 per meal for 300 meals on April 10. Maria has sufficient idle capacity to fill this special order. These meals will incur all of the variable costs of meals produced, but variable administrative costs and total fixed costs will not be affected.
A. What impact would accepting this special order have on operating profit?
Status Quo
3,000 Units
Alternative
3,300 Units
B. From an operating profit perspective for April, should Maria accept the order?
Maria's Food Service provides meals that nonprofit organizations distribute to handicapped and elderly people. Here is her forecasted income statement for April, when she expects to produce and sell 3,000 meals:
Explanation / Answer
computation of operating profit from 3000 units
computation of operating profit from 3,300 units
incerase the operating profit for extra 300 untis is 2,550-2,400 =$ 150.00
so maria accept the order.
particulars amount per unit amount 3000 units sales revenue $ 6.00 $ 18,000.00 variabe costs ; meals $ 3.00 $ 9,000.00 administrative $ .50 $ 1,500.00 contribution margin $ 2.50 $ 7,500.00 fixed cost $ 1.70 $ 5,100.00 Operating profit $ .80 $ 2,400.00