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 2,900 meals: Amount $ 17,110 12,905 $ 4,205 Per Unit $ 5.90 4.45 $ 1.45 0.80 Sales revenue Costs of meals produced Gross profit Administrative costs 2,320 $ 0.65 $ 1,885 Operating profit Fixed costs included in this income statement are $4,205 for meal production and $580 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 $3.45 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. Required: a. What impact would accepting this special order have on operating profit? (Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect.) Status Quo 2.900 Units Alternative 3,200 Units Difference 1,035 higher 17,110 $ 18,145 $ Sales revenue Variable costs: higher Meals 8,700 O none Administrative 1,740 1,740 higher Contribution margin 2$ 6,670 4,785 O none Fixed costs 4,785 1,885 higher Operating profit
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 2,900 meals: Amount $ 17,110 12,905 $ 4,205 Per Unit $ 5.90 4.45 $ 1.45 0.80 Sales revenue Costs of meals produced Gross profit Administrative costs 2,320 $ 0.65 $ 1,885 Operating profit Fixed costs included in this income statement are $4,205 for meal production and $580 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 $3.45 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. Required: a. What impact would accepting this special order have on operating profit? (Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect.) Status Quo 2.900 Units Alternative 3,200 Units Difference 1,035 higher 17,110 $ 18,145 $ Sales revenue Variable costs: higher Meals 8,700 O none Administrative 1,740 1,740 higher Contribution margin 2$ 6,670 4,785 O none Fixed costs 4,785 1,885 higher Operating profit
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter2: Basic Cost Management Concepts
Section: Chapter Questions
Problem 18E: Lakeesha Barnett owns and operates a package mailing store in a college town. Her store, Send It...
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Alternative 3,200 units meals
Transcribed Image Text: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 2,900 meals:
Amount
$ 17,110
12,905
$ 4,205
Per Unit
$ 5.90
4.45
$ 1.45
0.80
Sales revenue
Costs of meals produced
Gross profit
Administrative costs
2,320
$ 0.65
$ 1,885
Operating profit
Fixed costs included in this income statement are $4,205 for meal production and $580 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 $3.45 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.
Required:
a. What impact would accepting this special order have on operating profit? (Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect.)
Status Quo
2.900 Units
Alternative
3,200 Units
Difference
1,035 higher
17,110 $
18,145 $
Sales revenue
Variable costs:
higher
Meals
8,700
O none
Administrative
1,740
1,740
higher
Contribution margin
2$
6,670
4,785
O none
Fixed costs
4,785
1,885
higher
Operating profit
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