Relevant costs Carmen's Catering provides lunches and dinners for various groups or organizations. A new customer has approached Carmen's Catering to provide dinner for a special event featuring a well-known speaker, with estimated attendance of 100 people. Carmen suggested two different menus to the customer. The first menu would require materials and direct labor cost of \($13\) per meal. The second menu would require materials and direct labor cost of \($16\) per meal. Carmen has developed the following cost analysis for her ongoing operations:

Event-related support per event \($100\)

Customer-related support per event 22 Facility-sustaining support per month 2,000 Carmen has sufficient excess capacity to handle the new customer's event. Carmen would like to know the minimum price she should charge for 100 meals of the first menu or 100 meals of the second menu.

Required

a. In determining the minimum prices, what assumptions need to be made about the behavior of support costs for Carmen's Catering?

b. What other factors are relevant for this decision?

c. What prices would you recommend for the first menu or the second menu for the new customer's dinner? Provide reasons for your recommendation.