Assume that MTA Sandwiches sells sandwiches for $7.20 each. The cost of each sandwich follows:

Materials	$	2.70
Labor		0.90
Variable overhead		0.45
Fixed overhead ($10,800 per month, 6,000 units per month)		1.80
Total costs per sandwich	$	5.85

One of MTAs regular customers asked the company to fill a special order of sandwiches at a selling price of $5.40 each for a fund-raising event sponsored by a social club at the local college. MTA has capacity to fill it without affecting total fixed costs for the month. MTAs general manager was concerned about selling the sandwiches below the cost of $5.85 per sandwich and has asked for your advice.

Required:

a. Prepare a schedule to show the impact on MTAs profits Status quo 6,000 units Alternative 6,400 units Difference/ Higher or Lower Sales revenue ? ? ?

Less variable costs ? ?

Materials ? ? ?

Labor ? ? ?

Variable Overhead ? ? ?

TOTAL VARIABLE COST ? ? ?

Contribution margin ? ? ?

Less: Fixed Costs ? ? ?

Operation Profit ? ? ?

b. based solely on the data given, what is the lowest price per sandwich at which the special order order can be filled without reducing MTAs profits?

Lowest Price______?_____ per sandwhich