Reference no: EM133042362

Question - Food for Vitality specializes in lunches for health-conscious people. The company produces a small selection of lunch offerings each day. The menu selections may vary from day to day, but Food for Vitality charges the same price per menu selection because it adjusts the portion sizes according to the cost of producing the selection. Food for Vitality currently sells 4,000 meals per month. Variable costs are $3.30 per meal, and fixed costs total $6,000 per month A government agency has recently proposed that Food for Vitality provide 1,500 meals next month for senior citizens at $3.00 per meal. Volunteers will deliver the meals to the senior citizens at no charge.

Required -

(a) Suppose Food for Vitality has sufficient idle capacity to accommodate the government order for next month. What will be the impact on Food for Vitality's operating income if it accepts this order?

(b) Suppose that Food for Vitality would have to give up regular sales of 400 meals, at a price of $4 40 each, to accommodate the government order for next month. What will be the impact on Food for Vitality's operating income if it accepts the government order?