Alice Catering Services has the contribution margin from the dinners amounted to $6000 annually.

Amount per unit

Sales Revenue $36000 $12.00

Cost of meals produced $27000 $9.00

Gross Profit $9000 $3.00

Administrative cost $4200 $1.40

Operating profit $4800 $1.60

Fixed cost for the meal production amounted to $4500 and $600 for Administrative cost. Alice has received a special order from an organization who is organizing a fund raising dinner for a special community project. The organization is offering to buy 400 meals for $4.00 the special order will require the use of idle capacity of 30%. These meals will incur all of the variable cost of the meals produced but Variable Administrative cost and Total Fixed Cost will not be affected.

Required:

A. if Alice decides to sell dinners what are the total cost for the making and buying the meals?

B. should Alice accept the special orders.

Answer rating: 100% (QA)

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