Question 4 FORD FOOD SERVICE Partial Income Statements for First and Second Quarters of Year2 First Quarter Second Quarter $36,000 49,000 $(13,000 $63,000 67,000 S (4,000) Sales at $3.60 per Meal (unit) Total Costs (Loss) Each dollar of variable cost per meal comprises 50 percent direct labor. 25 percent direct materials, and 25 percent variable overhead costs. Ford expects sales units, price per unit, variable cost per unit, and total fixed costs to remain at the same level during the third quarter as during the second quarter. Ford sold 17,500 meals in the second quarter. Required: a. What is the breakeven point in meals (units)? b. The company has just received a special order from a government agency that provides meals for senior citizens for 7,500 meals at a price of $3.20 per meal (unit). If the company accepts the order, it will not affect the regular market for 17,500 meals in the third quarter. The company can produce the additional meals with existing capacity, but direct labor costs per meal will increase by 10 percent for all meals produced because of the need to hire and use new labor. Fixed costs will increase S3,000 per quarter if the company accepts the new order. Should it accept the government order? Assume that the company accepts the order in part b. What level of sales to nongovernment customers provides third-quarter profit of $6,800? (The third quarter would be just like the second quarter if the company does not accept the government order.) C