Questions -

Q1) Maria food service to distribute to handicapped people. Here is her forecasted income statement for April when she expect to produce and sell 3000 meals

Amount Per Unit

Sales revenue 18000$ 6$

Costs of meals produced 13500 4.5

Gross profit 4500$ 1.5$

Administrative costs 2100 0.7

Operating profit 2400$ 0.8$

Fixed costs are 4500$ for meal production and 600$ for administrative costs. Maria has received a special request from an organization.

The organization is willing to pay 3.5$ per meal for 300 meals on April 10. Maria has sufficient idle capacity to fill this special order. This meals will incur all of the variable costs of meals produced but variable administrative costs and total fixed costs will not be affected.

a) What impact would accepting this order have on operating profit?

b) Should Maria accept the order?

Q2) Mel's Meals purchases cookies that it includes in the 10000 box lunches it prepares and sells annually. Mel's kitchen and adjoining meeting room operate at 70% of capacity. Mel purchases cookies for 0.6$ each but is considering making them instead. Mel can bake each cookie for 0.2$ material, 0.15$ for direct labor and 0.45$ for overhead without increasing its capacity. The 0.45$ for overhead includes an allocation of $0.30 per cookie for fixed overhead. However, total fixed overhead for the company would not increase if Mel's makes the cookies. Mel himself has come to you for advice. It would cost me $0.80 to make the cookies, but only $0.60 to buy. Should I continue buying them? Materials and labor are variable costs, but variable overhead would be only $0.15 per cookie. Two cookies are put into every lunch.

a) How would u advised Mel's? How can I compile a schedule to show the differential costs?