Parkview Fish Tacos sells tacos for $4.50 each. The cost of each taco follows: 

One of Parkview’s regular customers asked the company to fill a special order of tacos at a selling price of $3.50 each for a youth basketball tournament at the local school. Parkview has capacity to fill it without affecting total fixed costs for the month. Parkview’s general manager (and owner and cook) was concerned about selling the tacos below the cost of $3.75 and has asked for your advice.

Required

a. Prepare a schedule to show the impact on Parkview’s profits of providing 300 tacos in addition to the regular production and sales of 4,500 tacos per month.

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

c. What other factors might the general manager want to consider in setting a price for the special order?  

Transcribed Image Text:

Materials (food) Labor..... Variable overhead. Fixed overhead ($7,200 per month, 4,500 tacos per month).. Total costs per taco..... $1.35 0.55 0.25 1.60 $3.75