Maria's Food Service provides meals that nonprofit organizations distribute to handicapped and elderly people. The following is her forecasted income statement for April, when she expects to produce and sell 2,800 meals: Amount Per Unit $ 16,240 12,320 $ 3,920 2,240 $ 1,680 $ 5.80 Sales revenue Costs of meals produced Gross profit Administrative costs 4.40 $1.40 0.80 $0.60 Operating profit Fixed costs included in this income statement are $4.144 for meal production and $560 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 $3.40 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. 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.) Status Quo 2,800 Units Alternative Difference 3,100 Units Sales revenue Variable costs: Meals Administrative Contribution margin Fixed costs Operating profit
Maria's Food Service provides meals that nonprofit organizations distribute to handicapped and elderly people. The following is her forecasted income statement for April, when she expects to produce and sell 2,800 meals: Amount Per Unit $ 16,240 12,320 $ 3,920 2,240 $ 1,680 $ 5.80 Sales revenue Costs of meals produced Gross profit Administrative costs 4.40 $1.40 0.80 $0.60 Operating profit Fixed costs included in this income statement are $4.144 for meal production and $560 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 $3.40 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. 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.) Status Quo 2,800 Units Alternative Difference 3,100 Units Sales revenue Variable costs: Meals Administrative Contribution margin Fixed costs Operating profit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Maria's Food Service provides meals that nonprofit organizations distribute to handicapped and elderly people.
Transcribed Image Text:Maria's Food Service provides meals that nonprofit organizations distribute to handicapped and elderly people. The following is her
forecasted income statement for April, when she expects to produce and sell 2,800 meals:
Amount
Per Unit
$ 16, 240
12, 320
$ 3,920
2, 240
$ 1,680
Sales revenue
$ 5.80
Costs of meals produced
Gross profit
Administrative costs
4.40
$ 1.40
0.80
$0.60
Operating profit
Fixed costs included in this income statement are $4.144 for meal production and $560 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
$3.40 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.
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.)
Status Quo
2,800 Units
Alternative
Difference
3,100 Units
Sales revenue
Variable costs:
Meals
Administrative
Contribution margin
Fixed costs
Operating profit
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education