Bene Petit currently offers three meal sizes: single-serve, dual-serve, and family-sized. Single-serve meals make up about 5% of total sales revenue and have the lowest contribution margin of the three products. Taylor is trying to decide whether to eliminate single-serve meal kits but is unsure how it would affect profit and the number of meals donated to homeless families. The following additional details are available: 

• The price of a single-serve meal is $5.00. 

• Variable manufacturing costs for customer meals are $2.20 per single-serve meal, $3.20 per dual-serve meal, and $5.20 per family-sized meal. 

• Variable manufacturing costs are $1.25 per donated meal. 

• Variable delivery expenses for customer meals are $2 per order and the average order size is 4 meals per order. 

• Delivery expenses for donated meals are $125 for every 500 meals delivered or about $0.25 per donated meal. 

• About $500 in monthly advertising expenses could be saved if the single-serve product were eliminated. 

• Taylor believes that about 25% of single serve customers would switch to dual-serving meals, but would reduce their order size from 4 meals per week to 2 meals per week.

How much contribution margin will be lost from the single-serve meals that are eliminated?

Answer rating: 100% (QA)

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