Question

Consider this: Ribs on the Run has the capacity to serve 300 plates daily It typically sells 200 plates for $8 per plate on Saturdays (before considering the special order) The variable costs for each plate is $5, which includes $4 for the barbeque meat and $1 for other plate items, such as sauce and serveware The total fixed costs for the day regardless of sales is $150, which includes the parking fee, insurance, hourly employee wages, and so forth At full capacity, fixed costs could be broken down to $0.50 per plate ($150/300 plates) Based solely on the profit, if any, of the special order, should the truck sell 100 plates to Beta Alpha Gamma for $5.25 a plate? Ribs on the Run [Select] fill the special order because it will [Select] the business [Select ]

Answer 1

Since there is spare capacity, no additional fixed costs will be incurred on the special order

Hence, the relevant cost is only the incremental variable cost

SHOULD fill the special order

Because it will Increase the income by (5.25-5)*100 = $25

Provided it does not affect regular sales