C process aifected them further into complete sail boats. Asslul Special Order G
ID: 2514591 • Letter: C
Question
C process aifected them further into complete sail boats. Asslul Special Order Great Oaks Farm 's leading product Salad and ready to serve. Ihe rows organic vegetables and sells them to local restaurants after processing. The t is Salad-in-a-Bag, which is a mixture of organic green salad ingredients prepared LO1 ompany sells a large bag to restaurants for $25. It calculates the variable cost g $1 for local delivery), and the average total cost per bag is $22. Because the a la del bag at $19 (including SI per ity. A representative the other city will cost the company $0.75 per ba r bag at are perishable and Great Oaks Farm is experiencing a large crop, the farn has extra capac- ve of a restaurant association in another city has offered to buy fresh salad stock from augment its regular supply during an upcoming international festival. The restaurart n wants to buy 2,500 bags during the next month for $21 per bag. Delivery to restaurants in g. It can meet most of the order with excess capacity have a nologi- lue. An and too, is achine, e com- ut would sacrifice 400 bags of regular sales to fill this special order. Please assist Great Oaks Farm's nagement by answering the following questions. . Using differential analysis, what is the impact on profits of accepting this special order? c How would the analysis change if the special order were for 2,500 bags per month for the next five ma Required h. What nonquantitative issues should management consider before making a final decision? ,000) years? ,000) 9. Special Order ,000) Nature's achef's salad selling capacity of 800 meals Garden, a new restaurant situated on a busy highway in Pomona, California, specializes in for $7. Daily fixed costs are $1,200, and variable costs are $4 per meal. With a ls ner day, the restaurant serves an average of 750 meals each dayExplanation / Answer
Answer 1
Answer 2
Non-quantitative issues:
In case the regular customers of Great Oak Farm comes to knowledge about it selling the same bag to other restaurants at lower rate, sales of the regular customers can be affected adversely.
It has to ensure that the quality of the product is not reduced owing to extra work on hand
Answer 3
During this period Greak Oak Farms is experiencing large crop. This may not be the scenario in next years. So completing order of 2500 bags per month, it needs to sacrifice regular sales.
Variable Cost other than delivery Cost 18.00 Delivery Cost for new order 0.75 Total Variable Cost 18.75 Selling Price 21.00 Contribution earned per bag 2.25 Contribution Margin on 2,500 bags 5,625 Contribution Margin Loss on 400 bags 2,400 Net Benefit of accepting special order 3,225Related Questions
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