Required information Case 5A-12 Analysis of Mixed Costs in a Pricing Decision [LO5-11 The following information applies to the questions displayed below Maria Chavez owns a catering company that serves food and beverages at parties and business functions. Chavez's business is seasonal, with a heavy schedule during the summer months and holidays and a lighter schedule at other times One of the major events Chavez's customers request is a cocktail party. She offers a standard cocktail party and has estimiated the cost per guest as follows: $16.00 5.00 Overhead (8.5 houre $18.68/hr.)9.34 Food and beverages Labor (8.5 hour e $10.8 /hr.) Total cost per guest $30.34 The standard cocktail party lasts three hours and Chavez hires one worker for every six guests, so that works out to one half hour of labor per guest. These workers are hired only as needed and are paid only for the hours they actually work When bidding on cocktail parties. Chavez adds a 12% markup to yield a price of about $39 per guest She is confident about her estimates of the costs of food and beverages and labor but is not as comfortable with the estimate of cost. The $18.68 overhead cost per labor-hour was determined by dividing total overhead expenses for the last 12 months by total labor-hours for the same period. Monthly data concerning overhead costs and labor-hours follow overhead Prev 6 7 7 Next > BNM