Dana Rand owns a catering company that prepares banquets and parties for both in
ID: 2538418 • Letter: D
Question
Dana Rand owns a catering company that prepares banquets and parties for both indlvidual and business functions throughout the year. Rand's business is seasonal, with a heavy schedule during the summer months and the year-end holildays and a light schedule at other times. During peak periods, there are extra costs; however, even during nonpeak periods Rand must work more to cover her expenses One of the major events Rand's customers request is a cocktail party. She offers a standard cocktall party and has developed the following cost structure on a per-person basis. Food and beverages Labor (0.8 hr. $10 per hour) Overhead (0.8 hr. e s12 per hour) Total cost per person $12.00 --,60- $29.60 When bidding on cocktail parties, Rand adds o 20 percent markup to this cost structure as e profit margin Rand is quite certain about her estimates of the prime costs but is not as comfortable with the overheod the past 12 months presented in the following table, These data Indicate that overhead expenses ve expended. The $1 (61,500) and rounding to the nearest dollar e. This estimate was based on the actual data for 2 estimate was determined by dividing total overhead expended for the 12 months ($718,000) by total labor hours ry with the direct-labor hours Month January February March April Hay June July August September October November 64,000 85,000 40,000 82,000 41,000 67,000 67,000 62,000 50,000 62,000 61,500 $718,000 Labor llloverhead Hours lllExpenses 2600 $ 55,000 6,800 43,000 3,400 7,600 2,900 5, 800 4, 600 7,500 2,400 5,900 7,900 4.100 1 TotalExplanation / Answer
2. Total cost of cocktail party (X) = 2X + 51000 where X is the number of hours utilized.
3. Number of hours = 370*0.80 = 296 LHs
Total cost of cocktail party of 370 person = 2 * 296 + 51000 = $51592
Minimum bid price = $51592 * (1 + 0.20) = $61910.40
4) The other factors which have to be considered by Dana Rand in developing the bid price for the cocktail party are:
a. availability of time of the catering business
b. number of frequency of the cocktail orders
c. availability of the material in the market
d. mode of payment whether involves the interest cost
e. the labor availability and the reliable labor rate.
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