Sofia's Cafe caters lunches, brunches and dinners for various groups or organizations. A new customer has approached Sofia's Cafe to provide dinner for a special event featuring a well-known speaker, with an estimated attendance of 100 people. Sofia suggests two different menus to the customer. The first menu will require materials and direct labor cost of $13 per meal. The second menu will require materials and direct labor cost of $16 per meal. Sofia has developed the following analysis on the costs that support her ongoing operations:

• Event-related support$ 100
• Customer-related support22
• Facility-sustaining support per month2,000

The timing of the new customer's event will present no problems for Sofia's Cafe. Sofia would like to know the minimum price she should charge for 100 meals of the first menu or 100 meals of the second menu.

Requirements:

1.What assumptions need to be made about the behavior of each of the support costs for Sofia's Cafe to determine the minimum prices? (6 marks)

2.Based on the assumptions made in (1), what are the minimum prices that you would recommend for the first menu and for the second menu for the new customer's dinner? Provide reasons for your recommendation. (6 marks)

3.What are other factors relevant to this pricing decision? Name three and explain. (3 marks)