JocelynKaiser
Dec 21, 2008, 05:08 PM
The questions are:
1) What is the cost per dinner based on average sales and April prices?
2) If sales increase to 400,000 dinners per month, what will the cost per dinner be (assuming cost behaviors remain the same as in April)?
3) If sales are 400,000 dinners per month but the company does not want the cost per dinner to exceed its current level (based on number 1), what amount can the company pay for meat, assuming al other costs are the same as in April?
4) The company's major competitor has bid a price of $10.96 per dinner to the airlines. The profit margin in the industry is 100% of the total cost. If this company is to retain the airlines' business, how many dinners must the company produce each month to reach the bid price of the competitor and maintain the 100% profit margin? Assume April cost patterns will not change and dinners must be produced in batches of 1,000.
The information is:
The company's sales average is 300,000 meals per month. The significant costs of each dinner prepared are for meat, vegetables, plastic trays, and utensils. (no desserts are provided) The company prepares the meals in batches of 1,000. The data is from the company's accounting records for April.
Cost of meat for 1,000 dinners $900
Cost of vegetables for 1,000 dinners $360
Cost of plastic trays and utensils for 1,000 dinners $120
Direct labour cost for 1,000 dinners $950
Overhead charges total $1,200,000 per month and are considered fully fixed for purposes of cost estimation.
Here are the calculations I got for 1 and 2. It is not really adding up for 3 and 4 and I am a bit lost.
Total cost for April to produce 300,000 meals:
Cost of meat for 300,000 dinners 270,000
Cost of veg. for 300,000 dinners 108,000
Cost of plastic trays and utensils for 300,000 dinners 36,000
Direct labour cost for 300,000 dinners 285,000
699,000
699,000/300,000= $2.33
1,200,000/300,000=$4.00
1) Cost per dinner for 300,000 in April: 2.33+4.00= $6.33
2) Cost per dinner for 400,000 assuming the same costs as April:
1,200,000 + (2.33 x 400,000)
= 2,132,000/400,000
= $5.33
1) What is the cost per dinner based on average sales and April prices?
2) If sales increase to 400,000 dinners per month, what will the cost per dinner be (assuming cost behaviors remain the same as in April)?
3) If sales are 400,000 dinners per month but the company does not want the cost per dinner to exceed its current level (based on number 1), what amount can the company pay for meat, assuming al other costs are the same as in April?
4) The company's major competitor has bid a price of $10.96 per dinner to the airlines. The profit margin in the industry is 100% of the total cost. If this company is to retain the airlines' business, how many dinners must the company produce each month to reach the bid price of the competitor and maintain the 100% profit margin? Assume April cost patterns will not change and dinners must be produced in batches of 1,000.
The information is:
The company's sales average is 300,000 meals per month. The significant costs of each dinner prepared are for meat, vegetables, plastic trays, and utensils. (no desserts are provided) The company prepares the meals in batches of 1,000. The data is from the company's accounting records for April.
Cost of meat for 1,000 dinners $900
Cost of vegetables for 1,000 dinners $360
Cost of plastic trays and utensils for 1,000 dinners $120
Direct labour cost for 1,000 dinners $950
Overhead charges total $1,200,000 per month and are considered fully fixed for purposes of cost estimation.
Here are the calculations I got for 1 and 2. It is not really adding up for 3 and 4 and I am a bit lost.
Total cost for April to produce 300,000 meals:
Cost of meat for 300,000 dinners 270,000
Cost of veg. for 300,000 dinners 108,000
Cost of plastic trays and utensils for 300,000 dinners 36,000
Direct labour cost for 300,000 dinners 285,000
699,000
699,000/300,000= $2.33
1,200,000/300,000=$4.00
1) Cost per dinner for 300,000 in April: 2.33+4.00= $6.33
2) Cost per dinner for 400,000 assuming the same costs as April:
1,200,000 + (2.33 x 400,000)
= 2,132,000/400,000
= $5.33