The General Hospital currently prepares the food for their patients: Information

Question

The General Hospital currently prepares the food for their patients: Information regarding the food preparation department is as follows: meals per week: 4400 variable cost per meal $3.75 fixed cost $12,000 per week a) A representative of the Easy-Bake Oven Company has come to you with a proposal:   rent their oven for $16,000 per week; with this state-of-the-art oven; your variable cost per meal will drop $2.95 per meal hence the new variable cost per meal will be $0.80 and the fixed costs of 12,000 drop to 8,900.   what is the break even point for the Easy-Bake-Oven? besides cost, what other factors should you consider in deciding whether or not to use the Easy-Bake-Oven? Do you recommend using the Easy-Bake-Oven? Why or why not show your work;   The General Hospital currently prepares the food for their patients: Information regarding the food preparation department is as follows: meals per week: 4400 variable cost per meal $3.75 fixed cost $12,000 per week a) A representative of the Easy-Bake Oven Company has come to you with a proposal:   rent their oven for $16,000 per week; with this state-of-the-art oven; your variable cost per meal will drop $2.95 per meal hence the new variable cost per meal will be $0.80 and the fixed costs of 12,000 drop to 8,900.   what is the break even point for the Easy-Bake-Oven? besides cost, what other factors should you consider in deciding whether or not to use the Easy-Bake-Oven? Do you recommend using the Easy-Bake-Oven? Why or why not show your work;  

Explanation / Answer

what is the break even point for the Easy-Bake-Oven?

break even point =12900/2.95=4373 Meals

besides cost, what other factors should you consider in deciding whether or not to use the Easy-Bake-Oven?

Flexibility in usage of Oven.

Operating Efficiency.

Availablity of other resources to new machine

Do you recommend using the Easy-Bake-Oven? Why or why not

Yes i wold recommend usinf of Easy bake oven becasue break even point is within the weekly demand of 4400 meals

Incremental Saving in variable Cost 2.95 Fixed Cost =16000-(12000-8900) 12900

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