Chapter 4 Fundamentals of Cost Analysis for Decision Making, Cost Accounting

31. Special Orders
Maria’s Food Service provides meals that nonprofi t organizations distribute to handicapped and
elderly people. Here is her forecasted income statement for April, when she expects to produce and
sell 3,000 meals:
Amount Per Unit
Sales revenue . . . . . . . . . . . . . . . . . . . . . . $18,000 $6.00
Costs of meals produced . . . . . . . . . . . . . 13,500 4.50
Gross profi t . . . . . . . . . . . . . . . . . . . . . . . . $ 4,500 $1.50
Administrative costs . . . . . . . . . . . . . . . . . 2,100 0.70
Operating profi t . . . . . . . . . . . . . . . . . . . $ 2,400 $0.80
Fixed costs included in this income statement are $4,500 for meal production and $600 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 $3.50 per meal for
300 meals on April 10. Maria has suffi cient idle capacity to fi ll this special order. These meals will
incur all of the variable costs of meals produced, but variable administrative costs and total fi xed
costs will not be affected.
Required
a. What impact would accepting this special order have on operating profi t?
b. Should Maria accept the order?
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