Compute the difference in service volume

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Reference no: EM13750772

Month	Meals Served (Service Volume)	Total Costs
July	3,600	$21,000.00
August	4,100	$22,000.00
September	4,300	$23,150.00
October	4,700	$24,500.00
November	4,800	$25,500.00
December	4,900	$26,200.00

The total contracted meals for the year is 33,000

The contracted cost per meal is 6.50

Step 1:Compute the difference inservice volume (number of meals served) between the high and the low time periods (months). Subtract the low time period from the high time period.

High Time Period Service Volume	Low Time Period Service Volume	Difference in Service Volume

Step 2:Compute the difference incostsbetween the high and low time periods (months). Subtract the low time period from the high time period.

High Time Period Costs	Low Time Period Costs	Difference in Cost

Step 3:Compute the variable cost per unit of service. Divide cost by service volume

Cost (Difference between high & low time periods - Step 2)	Service Volume(Difference between high & low time periods - Step 1)	Variable Cost Per Unit

Step 4:Compute thetotal variable costs for the low time period. Multiply variable cost per unit by service for low time period.

Variable Cost Per Unit(answer from Step 3)

Service For

Low Time Period

Total Variable Cost

Step 5:Compute total fixed costs for the low time period. Subtract total variable cost from low time period cost.

Low Time Period Cost	Total Variable Cost(answer from Step 4)	Total Fixed Cost

Step 6:Compute the Break-Even Point using the BEP Formula PX = A + BX, where:

P = Cost Per Meal

X = What you are solving for

A = Total Fixed Costs (from Step 5)

B = Variable Cost Per Unit (from Step 3)

Show calculations below:

Step 7:Compute the BEP for the year by multiplying the answer from Step 6 by 12.

BEP (from Step 6)	Months in the Year	Annual BEP

Step 8: Determine the number of meals by subtracting the BEP for the year (answer from Step 7) from the Total Contracted Meals (see scenario).

Total Contracted Meals	BEP	Number of Meals

Step 9: Determine the Revenue using the number of meals (answer from Step 8) multipliedby the contracted cost per meal.

Number of Meals	Cost Per Meal	Revenue

Step 10: Determine the Total Cost using the number of meals (answer from Step 8)multiplied by the variable cost (Step 3).

Number of Meals	Variable Cost	Total Cost

Step 11:Subtract the Total Cost (Step 10) from the Revenue (Step 9) and this is your Profit

Revenue	Total Cost	Profit

Reference no: EM13750772

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