Answer:
The best option would be option d since it provides the least cost and therefor a higher possibility of being the most profitable.
a. Total cost for option a=$37,000
b. Total cost for option b=$36,250
c. Total cost for option c=$33,750
d. Total cost for option d=$30,625
Explanation:
<em>Step 1: Determine the formula total cost</em>
Total cost=direct costs+cooking cost+serving cost+improvement costs
<em>Consider option a</em>
where;
direct costs=$400×25=$10,000
cooking costs=cooking cost per catering event×number of catering events
cooking costs per year=500×25=$12,500
serving cost=serving cost per plate×number of events×number of plates per event
serving cost per plate=$12
number of events=25
number of plates per event=(80/100)×50=40
serving cost=12×25×40=$12,000
Improvement costs=$2,500
replacing;
Total cost=10,000+12,500+12,000+2,500=$37,000
<em>Consider option b</em>
where;
direct costs=$10,000
cooking costs=cooking cost per catering event×number of catering events
cooking costs per year=500×25=$12,500
serving cost=serving cost per plate×number of events×number of plates per event
serving cost per plate=$12×0.75=$9
number of events=25
number of plates per event=50
serving cost=9×25×50=$11,250
Improvement costs=$2,500
replacing;
Total cost=10,000+12,500+11,250+2,500=$36,250
<em>Consider option c</em>
where;
direct costs=$10,000×0.75=$7,500
cooking costs=cooking cost per catering event×number of catering events
cooking costs per year=500×25=$12,500
serving cost=serving cost per plate×number of events×number of plates per event
serving cost per plate=$12×0.75=$9
number of events=25
number of plates per event=50
serving cost=9×25×50=$11,250
Improvement costs=$2,500
replacing;
Total cost=7,500+12,500+11,250+2,500=$33,750
<em>Consider option d</em>
where;
direct costs=$10,000×0.75=$7,500
cooking costs=cooking cost per catering event×number of catering events
cooking costs per year=500×25×0.75=$9,375
serving cost=serving cost per plate×number of events×number of plates per event
serving cost per plate=$12×0.75=$9
number of events=25
number of plates per event=50
serving cost=9×25×50=$11,250
Improvement costs=$2,500
replacing;
Total cost=7,500+9,375+11,250+2,500=$30,625
