Assume that MTA Sandwiches sells sandwiches for $7.20 each. The
cost of each sandwich follows:

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Question: Assume that MTA Sandwiches sells sandwiches for $7.20 each. The cost of each sandwich follows: …
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Materials $ 2.70
Labor 0.90
Variable
overhead
0.45
Fixed overhead
($10,800 per month, 6,000 units per month)
1.80
Total costs per
sandwich

$

5.85

One of MTA’s regular customers asked the company to fill a special
order of sandwiches at a selling price of $5.40 each for a
fund-raising event sponsored by a social club at the local college.
MTA has capacity to fill it without affecting total fixed costs for
the month. MTA’s general manager was concerned about selling the
sandwiches below the cost of $5.85 per sandwich and has asked for
your advice.

Required:

a. Prepare a schedule to show the impact on
MTA’s profits
                       
Status quo 6,000
units           
Alternative 6,400 units       
Difference/ Higher or Lower
Sales
revenue           
?                                           
?                                            
?

Less variable
costs         
?                                            
?                                     

Materials                         
?                                             
?                                     
?

Labor                               
?                                             
?                                     
?

Variable
Overhead              
?                                             
?                                     
?

TOTAL VARIABLE COST    
?                                              
?                                       
?

Contribution
margin             
?                                                
?                                    
?

Less: Fixed
Costs               
?                                                
?                                     
?

Operation
Profit                    
?                                                
?                                     
?

b. based solely on the data given, what is the
lowest price per sandwich at which the special order order can be
filled without reducing MTA’s profits?

Lowest Price______?_____ per sandwhich

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