How do you identify the need for the meeting?
1 answer:
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Answer:
Increase operational profit by $156
Explanation:
As for the provided information, we know that the there is an idle capacity lying, which can now be used, and since the capacity is idle, no extra fixed cost will be incurred.
The variable cost for each unit is as follows:
Cost of meal produced = $14,720 which includes fixed cost of $4,864, variable cost = $14,720 - $4,864 = $9,856
Cost per meal = $9,856/3,200 = $3.08
Administrative cost as provided will not be affected.
Thus, the total relevant cost per meal = $3.08
Cost of 300 meals = $3.08 300 = $924
Since the organization will pay $3.60 per meal, there will be total revenue from such sales as follows:
$3.60 300 = $1,080
Less: Total Cost = ($924)
Profit = $156
Therefore, this special order will increase the operating profit of Maria by $156.