Mead Meals on Wheels

Case Study Mead Meals on Wheels

The Mead Meals on Wheels Center (MMWC) provides meals every day to the homebound elderly. The city of Wabash pays MMWC $32 per week for each person it serves. There is no shortage of demand for MMWC’s services among the elderly citizens of Wabash, and MMWC can find qualified recipients for as many meals as it can deliver. Each person helped by MMWC receives two hot meals per day, seven days per week, for a total of 14 meals every week.

To service the contract, MMWC has a central kitchen that has the capacity to produce a maximum of 9,600 meals per day. It costs MMWC an average of $36,000 per week to operate the kitchen and other central facilities regardless of the number of meals that MMWC serves. This covers all of MMWC’s fixed costs (e.g., rent, equipment costs, and its personnel including administrative staff) as well as its fixed seasonal service contract costs (utilities, snow removal, etc.).

The first problem that MMWC faces is figuring out how much it can afford to spend per person, per week for food to supply the program. Food is MMWC’s only variable expense. You are MMWC’s only program analyst.

DESCRIPTION: This Mini-Case is taken from our textbook: Financial Management for Public, Health, and Not-for-Profit Organizations by Finkler, Purtell, Calabrese, and Smith, Pearson, 4thEdition--Chapter 9(pp. 299-301). This case highlights the problems and challenges faced by executive directors in a not-for-profit setting. It highlights the importance of using break-even analysis and capital budget analysis to make special decisions.

QUESTIONS: ISSUES TO BE DISCUSSED

Note: Use the questions below to structure your analysis. Please be sure to thoroughly discuss the issues brought up in these questions. Your analysis report should not be just a sequence of questions and answers. You are expected to tie the concept together to fashion a cogent report.

1. What do you tell her? Support your recommendation and present your finding in a way that the executive director will understand.

a) Assuming that you pay your suppliers quarterly and that you are paid by Wabash quarterly, what would you recommend doing?

b) Would your answer be different if you were paid by Wabash and pay your suppliers weekly? Annually?

2. Incorporating all of the things that have happened during the year, as well as you capital budgeting recommendation, prepare a new quarterly budget and an annual summary for MMWC for the coming year.