MEAD MEALS ON WHEELS CENTER

Average Fixed Cost per week $36,000

Revenue per person per week $32
Maximum production per day 9,600 meals
Maximum people per day = 9600 meals/day : 2 meals/day/person 4,800 people
number of weeks in a quarter 13 weeks
number of daysin a week 7 days

Difference between bid and break even 0.5

Budgeted per person per weekly cost = BEP - difference bid $24.00
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Quarterly Fixed Cost per weeks 38,000 34,000 35,000 37,000

Actual meals in 1st quarter 4,600 people

Unit cost difference in 1st quarter -$0.75
actual cost in 1st quarter $23.25
additional fixed weekly cost in 1st quarter $2,000

Cost of additional equipment 700,000

Cost of capital 9%
Life of equipment In years 5
New maximum production per day 10,400 meals
Maximum number of people 5,200 people

Interest rate 8%
Residual Value 10%

Question 1
Maximum amount that MMWC can spend per person per week on food

People fed per week: weekly capacity in meals = 9600 meals x 7 days = 4,800 people fed per week @ $ 32 per person
contract meals per person fed 2 meals per day x 7 daya`
(to find how many people MMWC can afford to fed)

Break Even Quantity (Q): Fixed Cost (FC) Variabel cost: (Q x P) - FC = (4,800 x $ 32) - $ 36,000 #ERROR! 24.5
Unit Revenue (P) - Unit Variable Cost (VC) Q 4,800
(to find how much MMWC can spend per week per person on food)

Question 2
Revenue/quarter Number of people served per week x number of weeks in a quarter x price for each person
= 4800 people x 13 weeks x $32/person
1,996,800
Expense/quarter Fixed Cost Quarter 1 Quarter 2 Quarter 3 Quarter 4
(vary per quarter)per week 38,000 34,000 35,000 37,000
per quarter 468000 494,000 442,000 455,000 481,000
Variable cost number of people served x number of weeks in a quarter x cost of the food
= 4,800 people x 13 weeks x ($ 24,5 - $ 0,5)
1622400

Budget Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total

Revenue 1,996,800 1,996,800 1,996,800 1,996,800 7,987,200

Expenses
Variable 1,497,600 1,497,600 1,497,600 1,497,600 5,990,400
Fix 494,000 442,000 455,000 481,000 1,872,000
Total 1,991,600 1,939,600 1,952,600 1,978,600 7,862,400

Surplus/Defisit 5,200 57,200 44,200 18,200 124,800

Question 3
Revenue Variance actual budget
volume/week 4600 4800
Volume/quarter 59800 62400
Rates 32 32
Total revenue 1913600 1996800
Variance -83200 Unfavorable due to volume

Cost Variance Actual Budget

Variable Volume/week 4,600 4800
Volume/quarter 59,800 62400
Cost per unit $23.25 $24.00
total food expense $1,390,350 $1,497,600

Volume Variance $62,400.00 Favorable

Cost Variance $44,850.00 Favorable
Total Variance $107,250.00 Favorable

actual
Fixed variance due to additional
-$26,000 Unfavorable

Revenue Variance -83,200 Unfavorable

Variable cost variance 107,250 Favorable
Fixed Cost Variance -26,000 Unfavorable
Profit/Loss -1,950 Unfavorable
% of budget of 1st quarter -37.50%
% of budget of the year -1.56%

Question 4
Capital Budget Analysis Weekly Collections
Quarterly
and payments
Collections and paymentsAnnual Collection and Payments
PV Equipment purchase 700,000 700,000 700,000
Weekly Revenue from new equipment 3,500 45,500 182,000 additional people x marginal cash flow = (5,200 people - 4,800 people) x ($ 32 - $ 23,25) = 400 people x $ 8,75 = $ 3,500
annual cost per capital 9% 9% 9%
Number of Compounding period 52 4 1
Periodic discount rate (I) 0.17% 2.25% 9.00%
number of period (N) 260 20 5
PV Cash inflow 732,295 726,349 707,917
PV Cash outflow -700,000 -700,000 -700,000
NPV 32,295 26,349 7,917 NPV = PV Cash inflow - PV Cash outflow

NPV greater than 0 means that the company should buy the new equipment
Note that NPV from weekly quarterly and annual is different. Theoritically, if MMWC gets paid weekly, weekly model is more correct.

Question 5

residual value 10%

depreciable value =700,000*(100%-10%) 630000
economic value 5 years
period 20

Question 6
MMWC tidak bisa melebihi 5200 orang tanpa ada penambahan peralatan dan mungkin menambah tempat dan staff

Q1 Q2 Q3 Q4 Total
Revenue $2,163,200 $2,163,200 $2,163,200 $2,163,200 $8,652,800

Expense $40,000.00 $34,000.00 $35,000.00 $37,000.00 $36,500.00

-Variable food cost $1,571,700.00 $1,571,700.00 $1,571,700.00 $1,571,700.00 $6,286,800.00 $302.25 $23.25
-Fixed cost $520,000.00 $442,000.00 $455,000.00 $481,000.00 $1,898,000.00 $474,500.00
-Interest expense $14,000.00 $14,000.00 $14,000.00 $14,000.00 $56,000.00
-Additional depreciation $31,000.00 $31,000.00 $31,000.00 $31,000.00 $124,000.00

Total Expense $2,136,700.00 $2,058,700.00 $2,071,700.00 $2,097,700.00 $8,364,800.00

Surplus(deficit) $26,500 $104,500 $91,500 $65,500 $288,000