Manas Food Service provides meals that nonprofit organizaton

Manas Food Service provides meals that nonprofit organizatons distribute to handicapped and elderly people Here is her torecasted income statement for Apnl, when she expects to produce and sell 3,800 meals AmourntPer Unit S 25,840 S6.80 Sales revenue Costs of meals produced Gross prc Administratve costs 3 040 $ 4,180 1.10 Operating proft Fixed cosls included in this iicue slalemen are $T,220 fur meal pruduction and $760 for adinistralive costs. Maria has received a special requesl rom ar urganizalion sporisoring a picic Io raise unds for he Special Olyrmpics. This organization rs willing o pay $3.90 per meal or 300 meals on April 10. Maria hes su ent idle capacit o fill this speu order hese mouls will incur all of he vanable o sts o meals pro uce but variable administra ve costs and total ixed costs will not be affected. Required: a. What impact would ccepting this special orcer have on operating profit? Select option higher or lower\", keeping status Quo as the base. Select \"none\" if there is no effect. Difference 3,800 Units $25,840 4,100 Units Salos revenuc Variable costs: Mcals Contibution margin xed costs Operating pront

Solution

Status Quo3,800 Units Alternative 4,100 Units Difference Sales revenue $25,840.00 $27,880.00 $2,040.00 Higher Less: Variable Cost Meals 11400/3800 = $3 $11,400.00 $12,300.00 $900.00 Higher Administration @ $.80 (3040-760) $2,280.00 $2,280.00 $0.00 None Contribution Margin $12,160.00 $13,300.00 $1,140.00 Higher Fixed Costs (7220 + 760) $7,980.00 $7,980.00 $0.00 None Operating Profit $4,180.00 $5,320.00 $1,140.00 Higher Sales revenue 4100 units = $25,840 + 300 x $3.90 $27,880.00 Variable Cost = $11,400 + 300 x $3 $12,300.00