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Maria's Food Service provides meals that nonprofit organizations distribute to handicapped and elderly people. Here is her forecasted income statement for April, when she expects to produce and sell 3,900 meals: Sales revenue Costs of meals produced Gross profit Administrative costs Operating profit Per Unit $6.90 4.95 $1.95 0.80 $ 4,485 $ 1.15 Sales revenue Variable costs: Meals Administrative Contribution margin Fixed costs Operating profit Amount $ 26,910 19,305 Fixed costs included in this income statement are $7,605 for meal production and $780 for administrative costs. Maria has received a special request from an organization sponsoring a picnic to raise funds for the Special Olympics. This organization is willing to pay $3.95 per meal for 300 meals on April 10. Maria has sufficient idle capacity to fill this special order. These meals will incur all of the variable costs of meals produced, but variable administrative costs and total fixed costs will not be affected. Status Quo 3,900 Units $ 7,605 3,120 Required: a. What impact would accepting this special order have on operating profit? (Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect. Alternative 4,200 Units Difference

Maria's Food Service provides meals that nonprofit organizations distribute to handicapped and elderly people. Here is her forecasted income statement for April, when she expects to produce and sell 3,900 meals: Sales revenue Costs of meals produced Gross profit Administrative costs Operating profit Per Unit $6.90 4.95 $1.95 0.80 $ 4,485 $ 1.15 Sales revenue Variable costs: Meals Administrative Contribution margin Fixed costs Operating profit Amount $ 26,910 19,305 Fixed costs included in this income statement are $7,605 for meal production and $780 for administrative costs. Maria has received a special request from an organization sponsoring a picnic to raise funds for the Special Olympics. This organization is willing to pay $3.95 per meal for 300 meals on April 10. Maria has sufficient idle capacity to fill this special order. These meals will incur all of the variable costs of meals produced, but variable administrative costs and total fixed costs will not be affected. Status Quo 3,900 Units $ 7,605 3,120 Required: a. What impact would accepting this special order have on operating profit? (Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect. Alternative 4,200 Units Difference

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Maria's Food Service provides meals that nonprofit organizations distribute to handicapped and elderly people. Here is her forecasted income statement for April, when she expects to produce and sell 3,900 meals: Sales revenue Costs of meals produced Gross profit Administrative costs Operating profit Fixed costs included in this income statement are $7,605 for meal production and $780 for administrative costs. Maria has received a special request from an organization sponsoring a picnic to raise funds for the Special Olympics. This organization is willing to pay $3.95 per meal for 300 meals on April 10. Maria has sufficient idle capacity to fill this special order. These meals will incur all of the variable costs of meals produced, but variable administrative costs and total fixed costs will not be affected. Sales revenue Variable costs: Meals Amount $ 26,910 19,305 $7,605 3,120 $ 4,485 Required: a. What impact would accepting this special order have on operating profit? (Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect.) Administrative Contribution margin Fixed costs Operating profit Status Quo 3,900 Units Per Unit $6.90 4.95 $1.95 0.80 $ 1.15 Alternative 4,200 Units Difference
Transcribed Image Text:Maria's Food Service provides meals that nonprofit organizations distribute to handicapped and elderly people. Here is her forecasted income statement for April, when she expects to produce and sell 3,900 meals: Sales revenue Costs of meals produced Gross profit Administrative costs Operating profit Fixed costs included in this income statement are $7,605 for meal production and $780 for administrative costs. Maria has received a special request from an organization sponsoring a picnic to raise funds for the Special Olympics. This organization is willing to pay $3.95 per meal for 300 meals on April 10. Maria has sufficient idle capacity to fill this special order. These meals will incur all of the variable costs of meals produced, but variable administrative costs and total fixed costs will not be affected. Sales revenue Variable costs: Meals Amount $ 26,910 19,305 $7,605 3,120 $ 4,485 Required: a. What impact would accepting this special order have on operating profit? (Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect.) Administrative Contribution margin Fixed costs Operating profit Status Quo 3,900 Units Per Unit $6.90 4.95 $1.95 0.80 $ 1.15 Alternative 4,200 Units Difference
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