5. Top Catering operates a chain of 10 hospitals in the Los Angeles area. Its central food-catering facility, Topman, prepares and delivers meals to the hospitals. It has the capacity to deliver up to 1,425,000 meals a year. In 2017, based on estimates from each hospital controller, Topman budgeted for 950,000 meals a year. Budgeted fixed costs in 2017 were $1,539,000. Each hospital was charged $5.82 per meal-$4.20 variable costs plus $1.62 allocated budgeted fixed cost. (Click the icon to view additional information.) Read the requirements Requirement 1. How did Sagar calculate the budgeted fixed cost per meal of $1.62 in 2017? Select the formula to show how Sagar calculated the budgeted fixed cost per meal of $1.62 in 2017 Budgeted fixed Budgeted fixed cost / Denominator level-Budgeted meals a year = cost per meal Requirement 2. Using the same approach to calculating budgeted fixed cost per meal and pricing as in 2017, how much would hospitals be charged for each Topman meal in 2018? What would the reaction of the hospital controllers be to the price? Select the formula that is used to show how much the hospitals would be charged for each meal in 2018, then calculate the cost per meal. (Enter amounts to the nearest cent.) (2) Budgeted variable cost per meal (1) Budgeted fixed cost per meal + = Total budgeted cost per meal What would the reaction of the hospital controllers be to the price? If the hospitals have already been complaining about quality and cost and are allowed to purchase from outside, they (3) accept this (4) price. (5) purchase meals from outside the system, leading to a downward demand spiral, possibly putting Topman out of business. Requirement 3. Suggest an alternative cost-based price per meal that Sagar might propose and that might be more acceptable to the hospitals. What can Topman and Sagar do to make this price profitable in the long run? Suggest an alternative cost-based price per meal that Sagar might propose and that might be more acceptable to the hospitals. Sagar should use the (6) method. Now determine the price per meal under the method you chose, first select the labels, then calculate the amount. (Enter amounts to the nearest cent.) + (8) = Total budgeted cost per meal + or To make the price per meal profitable in the long run, Sagar will have to find ways to either (9) (10) Topman's practical capacity and the related fixed costs. 1: More Info Recently, the hospitals have been complaining about the quality of Topman's meals and their rising costs. In mid-2017, Top Catering's president announces that all Top Catering hospitals and support facilities will be run as profit centers. Hospitals will be free to purchase quality-certified services from outside the system. Harold Sagar, Topman's controller, is preparing the 2018 budget. He hears that three hospitals have decided to use outside suppliers for their meals, which will reduce the 2018 estimated demand to 810,000 meals. No change in variable cost per meal or total fixed costs is expected in 2018. 2: Requirements 1. How did Sagar calculate the budgeted fixed cost per meal of $1.62 in 2017? 2. Using the same approach to calculating budgeted fixed cost per meal and pricing as in 2017, how much would hospitals be charged for each Topman meal in 2018? What would the reaction of the hospital controllers be to the price? 3. Suggest an alternative cost-based price per meal that Sagar might propose and that might be more acceptable to the hospitals. What can Topman and Sagar do to make this price profitable in the long run