Assume that MTA Sandwiches sells sandwiches for $3.75 each. Thecost of each sandwich follows:
| | | |
| Materials | $ | 1.10 | |
| Labor | | 0.40 | |
| Variable overhead | | 0.50 | |
| Fixed overhead ($22,540 per month, 19,600 units per month) | | 1.15 | |
| Total cost per sandwich | $ | 3.15 | |
|
One of MTA's regular customers asked the company to fill a specialorder of sandwiches at a selling price of $2.60 each for afund-raising event sponsored by a social club at the local college.MTA has capacity to fill it without affecting total fixed costs forthe month. MTA's general manager was concerned about selling thesandwiches below the cost of $3.15 per sandwich and has asked foryour advice.
Required:
a. Prepare a schedule to show the impact onMTA's profits of providing 500 sandwiches in addition to theregular production and sales of 19,600 sandwiches per month.(Select option "higher" or "lower", keeping Status Quo asthe base. Select "None" if there is no effect.)
b. Based solely on the data given, what is thelowest price per sandwich at which the special order can be filledwithout reducing MTA's profits? (Round your answer to 2decimal places.)
