The following information pertains to Ford Food Service for the first two quarters of a year....

 

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The following information pertains to Ford Food Service for the first two quarters of a year. Ford Food Service First Second Quarter Quarter Sales at $5.20 per $46,800 $72,800 meal Total costs 72,000 ($25,200) 90,000 ($17,200) Income (loss) Each dollar of variable costs comprises 50 percent direct labor, 30 percent direct materials and 20 percent variable overhead costs. Ford expects sales units, price per unit, variable cost per unit and total fixed costs to remain at the same level in the third quarter as during the second quarter. Ford spld 14,000 meals in the second quarter. Required 1. What is the break-even point in meals (units) in a quarter? 2. The company just received a special order from a government agency that provides meals for senior citizens for 12,000 meals at a price of $4.70 per meal in the third quarter. If the company accepts the order, it will not affect the regular market for 14,000 meals in the third quarter. Moreover, if the company accepts the order, direct labor costs per meal will increase by 10 percent for all meals produced because of the need to hire and use new labor, and fixed costs will increase by $5,000 in the quarter. Should it accept the government order? 3. Suppose the company believes that such orders from government agencies can become part of routine business. It expects that for every four meals it sells to its regular (i.e., existing) customer base at $5.20 per meal, it can sell two meals to government agencies at $4.70 per meal. The company expects that this sales mix will remain steady. As in part b, if the company makes both types of meals, direct labor costs per meal will increase by 10 percent for all meals produced, and the fixed costs will increase by $5,000 per quarter. How many total meals will the company have to make and sell in a quarter in order to break even in this case? How many of these meals will represent sales to regular customers? In your opinion, will the company lose or benefit from adding this new line of business? The following information pertains to Ford Food Service for the first two quarters of a year. Ford Food Service First Second Quarter Quarter Sales at $5.20 per $46,800 $72,800 meal Total costs 72,000 ($25,200) 90,000 ($17,200) Income (loss) Each dollar of variable costs comprises 50 percent direct labor, 30 percent direct materials and 20 percent variable overhead costs. Ford expects sales units, price per unit, variable cost per unit and total fixed costs to remain at the same level in the third quarter as during the second quarter. Ford spld 14,000 meals in the second quarter. Required 1. What is the break-even point in meals (units) in a quarter? 2. The company just received a special order from a government agency that provides meals for senior citizens for 12,000 meals at a price of $4.70 per meal in the third quarter. If the company accepts the order, it will not affect the regular market for 14,000 meals in the third quarter. Moreover, if the company accepts the order, direct labor costs per meal will increase by 10 percent for all meals produced because of the need to hire and use new labor, and fixed costs will increase by $5,000 in the quarter. Should it accept the government order? 3. Suppose the company believes that such orders from government agencies can become part of routine business. It expects that for every four meals it sells to its regular (i.e., existing) customer base at $5.20 per meal, it can sell two meals to government agencies at $4.70 per meal. The company expects that this sales mix will remain steady. As in part b, if the company makes both types of meals, direct labor costs per meal will increase by 10 percent for all meals produced, and the fixed costs will increase by $5,000 per quarter. How many total meals will the company have to make and sell in a quarter in order to break even in this case? How many of these meals will represent sales to regular customers? In your opinion, will the company lose or benefit from adding this new line of business?

Answer rating: 100% (QA)

1 The breakeven point in meals units in a quarter is 40000 2 The company should accept the governmen... View the full answer