Mead Meals on Wheels Center The Mead Meals on Wheels Center (MMWC) provides meals every day to the homebound elderly. There is no shortage of demand for MMWCs services among the elderly citizens of Wabash, and MMWC can find qualified recipients for as many meals as it can deliver. Each person helped by MMWC receives two hot meals per day, 7 days per week, for a total of 14 meals every week. For each person MMWC serves per week (that is, for each elderly resident that is served 14 meals per week), the city of Wabash pays MMWC $32. To service the contract, MMWC has a central kitchen that has the capacity to produce a maximum of 9,600 meals per day. It costs MMWC an average of $36,000 per week to operate the kitchen and other central facilities regardless of the number of meals that MMWC serves. This covers all of MMWCs fixed costs (e.g., rent, equipment costs, and its personnel including administrative staff) as well as its fixed seasonal service contract costs (utilities, snow removal, etc.). The first problem that MMWC faces is figuring out how much it can afford to spend per person, per week for food to supply the program. Food is MMWCs only variable expense. You are MMWCs only program analyst. Question 1: The executive director has come to you to calculate how much MMWC can spend per week, per person and still break even. What do you tell the executive director? (3 points) Using your work to define MMWCs spending limit, the executive director prepared a request for bids and sent it to all of the food purveyors in and near Wabash. The best bid came in at $.50 (fifty cents) below the number that you have calculated as MMWCs break-even per person per week. Using the lowest bid and the information given earlier, the executive director wants you to prepare a budget for MMWC in a format that will allow her to monitor MMWCs performance on a quarterly basis for the coming year. For budgeting purposes, the executive director has told you to assume that there are 13 weeks in each quarter. You know from your experience that the fixed expenses for the organization vary by season. Fixed costs average $38,000 per week in the winter (1st quarter), $34,000 per week in the second quarter, $35,000 in the third quarter, and $37,000 in the fourth quarter. Question 2: Prepare a budget for the next four quarters of operation for the executive director and summarize it for the full year. (6 points) During the year, you conducted an analysis of MMWCs kitchen operations and determined that you could increase the capacity of the kitchen from 9,600 to 10,400 meals per day. You see a chance to increase the number of meals that MMWC can deliver to the elderly, as well as a way to increase your weekly revenue. However, expanding the kitchens capacity will require you to purchase $700,000 worth of equipment. The equipment has a useful life of 5 years. The executive director is interested in any idea that will expand service delivery. But, she is concerned about being able to pay for the equipment. She tells you that MMWCs cost of capital is 9 percent and asks if MMWC should purchase the equipment. Question 3: What do you tell her? Support your recommendation and present your findings in a way that the executive director will understand. (Hint: You have to perform a capital budgeting analysis). (8 points) a. Assuming that you pay your suppliers quarterly and that you are paid by Wabash quarterly, what would you recommend doing? b. Would your answer be different if you were paid by Wabash and pay your suppliers weekly? Annually?