Mead Meals Problem 1 Is a Variation Case Study

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Mead Meals

Problem 1 is a variation on the break-even problem. It asks you to calculate the maximum amount that MMWC can spend per person per week on food. In other words, what is the largest variable cost that MMWC can afford to pay and still cover all of its fixed costs?

From the problem set you know the Unit Revenue (P) is $32 per week. To find out how many people MMWC can feed in a week (Q), you have to do a little work. The problem set says that MMWC can prepare 9,600 meals per day. But its contract calls for it to deliver two meals per day per person.

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This means that MMWC can feed 4,800 people on any given day. Note that each person eats 14 meals per week, so MMWC can feed only 4,800 people per week. Fixed costs (FC) are $36,000 per week.

The base break-even formula is:

multiplying both sides of the equation by, we get:

expanding the terms on the left side, we get:

subtracting from both sides, we get:

multiplying both sides by -- 1, we get:

substituting the values above, we get:

$24.50 PER PERSON WEEK is….....

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