Special Order (LO1, 2, 3)

Nature’s Garden, a new restaurant situated on a busy highway in Pomona, California, specializes in a chet’s salad selling for $7. Daily fixed costs are $1,200, and variable costs are $4 per meal. With a capacity of 800 meals per day, the restaurant serves an average of 750 meals each day.

Required

a. Determine the current average cost per meal.

b. A busload of 30 Girl Scouts stops on its way home from the San Bernardino National Forest. The leader offers to bring them in if the scouts can all be served a meal for a total of $150. The owner refuses, saying he would lose $0.60 per meal if he accepted this offer. How do you think the owner arrived at the $0.60 figure? Comment on the owner’s reasoning.

c. Alocal businessman on a break overhears the conversation with the leader and offers the owner a One-year contract to feed 300 of the businessman’s employees one meal each day at a special price of $4.50 per meal. Should the restaurant owner accept this offer? Why or why not?