Gorman Catering Company has received an offer from a very important client to wo

Question

Gorman Catering Company has received an offer from a very important client to work a large party next month. The client has requested service for 1,000 people at $120 per person. Gorman normally charges $185 per person for catering services. Assuming that facility costs will not change if the order is taken and that unit-variable costs are $110 per person, should the offer be accepted? Yes. The client is very important. lt doesn't matter if a profit is earned or not. O Yes. The company will make an extra $10,000 and it builds a relationship with an important client. No. The company is giving up $65 of revenue for every person served. O No. The company will only make $10 per person. It should look elsewhere for additional jobs.

Explanation / Answer

In the problem provided to us Gorman Catering company has received an offer from a very important client to work for them in the next month's party. The client is offering them $120 per person for 1000 person.

Gorman catering company currently charges $185 per person. Also provided that if order is acceted , the facility cost would not change and the current variable cost is $110 per person.

Now, even though the company would be losing $65 if it accepts the order, but it would build a long lasting relation with the client. And also this offer will give the company $10000 revenue.

Therefore, option "C" is correct i.e The company will make an extra $10000 and it builds a relationship with an important client.

Related Questions

Navigate

• Browse (All)
• Browse G
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.