A company prepares dinners for several airlines, and sales average 300,000 meals per month. The significant costs of each dinner prepared are for the meat, veg,plastic trays, and untensiles. The company prepares meals in batches of 1,000.The following data are shown in the records for April 2008:
cost of meat for 1,000 dinners $900
cost of veg. for 1,000 dinners 360
cost of plastic trays and utensils for 1,000: 120
Direct labour cost for 1,000 dinners 950
overhead charges total $1,200,000 per month; these are considered fully fixed for purposes of cost estimation.
a. what is the cost per dinner based on average sales and April prices?
b. if asles increase to 400,000 dinners per month, what will the cost per dinner be (assuming that cost behaviour patterns remain the sames as in April)?
c. if sales are 400,000dinners per month but the company does not want the cost per dinner to exceed its current level (based on part (a)), what amount can the company pay for mean, assuming all other costs are the asme as in April?
d. the company's major competitor had bid a price of $10.96 per dinner , the profit margin in the industry is 100% of total cost, if A is to retain the business, how many dinners must A produce each month to reach the bid price of the competitor and mantain the 100% profit margin? assume April cost patterns will not change and dinners must be produced in batcher of 1,000.