Homework: Cost Behavior & Decisions 3 of 6 (0 complete) Save Score: 0 of 1 pt MN
ID: 2334453 • Letter: H
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Homework: Cost Behavior & Decisions 3 of 6 (0 complete) Save Score: 0 of 1 pt MN Score: 0%, 0 of 6 pts E3-33 (similar to) Question Help * Food for Vitality specializes in lunches for health-conscious people. The company Requirements produces a small selection of lunch offerings each day. The menu selections may (a) Suppose Food for vary from day to day, but Food for Vitality charges the same price per menu selection because it adjusts the portion sizes according to the cost of producing the selection. Food for Vitality currently sells 4,000 meals per month. Variable costs are $3.60 per meal, and fixed oosts total $4,500 per month. A governmentSuppose that Food forVtality would have to give up regular sales of 400 agency has recently proposed that Food for Vitality provide 1,500 meals next month for senior citizens at $3.20 per meal. Volunteers will deliver the meals to the e month, What will be the impact on Food for Vitality's operating income if senior citizens at no charge Vitality has sufficient idle capacity to acoommodate the govemment order for next month. What will be the impact on Food for Vitality's operating income if it accepts this order? meals, at a price of $4.60 each, to accommodate the govemment order for it acoepts the government order? Requirement a.Suppose Food for Vitality has sufficient idle capacity to accommodate the government order for next month. What will be the impact on Food for Vitality's operating income if it accepts this order Begin by determining the contibution margin per unit for this order. (Use parentheses or minus sign to show a negative contribution margin per unit.) Less: Contribution margin per unit Choose from any list or enter any number in the input fields and then click Check Answer remaining Clear All Check AnswerExplanation / Answer
(a)
Variable cost = $3.60 per meal
Selling price for government order = $3.20 per meal
Contribution margin per meal for government order = Selling price per meal - Variable cost per meal
= 3.20 - 3.60
= -$0.40
Size of government order = 1,500 meals
Hence, loss on government order = 1,500 x 0.40
= $600
Hence,if government order is accepted, overall operating income of Food for vitality will decrease by $600
(b)
Selling price = $4.60 per meal
Variable cost = $3.60 per meal
Contribution margin per meal = Selling price per meal - Variable cost per meal
= 4.60 - 3.60
= $1
Output to be sacrificed to accomodate the government order = 400 meals
Hence, loss of contribution due to accepting government order = 400 x 1
= $400
Hence, if government order is accepted, overall operating income of Food for vitality will decrease by $1,000 ( $400 loss of contribution + $600 loss on government order)
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