Savoury Foods, Inc. prepares meals for several airlines, and sales average 300,000 meals per month. The significant costs of each meal prepared are for the meat, vegetables, plastic trays and utensils; no desserts are provided because the airlines are concerned about cost control. The company prepares meals in batches of 1,000. The data are shown in the company’s accounting records for June 2020: Cost of meat for 1,000 meals ₱18,000 Cost of vegetables for 1,000 meals 7,200 Cost of plastic trays and utensils for 1,000 meals 2,400 Direct labor cost for 1,000 meals 19,000 Monthlyoverhead charges amount to ₱24,000,000 and are fully fixed. Company management has asked you to answer the following items. a. What is the cost per meal based on average sales and June prices? b. If sales increase to 400,000 meals per month, what will be the cost per meal (assuming that the cost behavior patterns remain the same as in June)? c. Assume that the sales increase to 400,000 meals per month. The company wants the per-unit cost to remain the same as was computed in part (a). By how much can the company increase its per-unit spending for meat, assuming all other costs remain constant?
Savoury Foods, Inc. prepares meals for several airlines, and sales average 300,000 meals per month. The significant costs of each meal prepared are for the meat, vegetables, plastic trays and utensils; no desserts are provided because the airlines are concerned about cost control. The company prepares meals in batches of 1,000. The data are shown in the company’s accounting records for June 2020:
Cost of meat for 1,000 meals ₱18,000
Cost of vegetables for 1,000 meals 7,200
Cost of plastic trays and utensils for 1,000 meals 2,400
Direct labor cost for 1,000 meals 19,000
Monthlyoverhead charges amount to ₱24,000,000 and are fully fixed. Company management has asked you to answer the following items.
a. What is the cost per meal based on average sales and June prices?
b. If sales increase to 400,000 meals per month, what will be the cost per meal (assuming that the cost behavior patterns remain the same as in June)?
c. Assume that the sales increase to 400,000 meals per month. The company wants the per-unit cost to remain the same as was computed in part (a). By how much can the company increase its per-unit spending for meat, assuming all other costs remain constant?
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