Aria'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 3,200 meals: amount per unit sales revenue $ 19,840 $ 6.20 costs of meals produced 14,720 4.60 gross profit $ 5,120 $ 1.60 administrative costs 2,240 0.70 operating profit $ 2,880 $ 0.90 fixed costs included in this income statement are $4,864 for meal production and $640 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 $3.60 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. what impact would accepting this special order have on operating profit?

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.

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know

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