A Cafe Specializes in Short Order Meals and Morning and Afternoon

question 37

Essay

A cafe specializes in short order meals and morning and afternoon snack breaks. It is open from 9:00 am until 4:00 pm. An office manager in a nearby high rise office building offers the owner a contract to provide her 50 employees with afternoon snack breaks for$2.00 each. Each employee would receive a drink and a snack item. The shop has an hourly capacity of 50 customers. The owner estimates that the variable costs of the afternoon breaks would be $1.20 each. Currently the afternoon service, starting at 2:00, is running at only 50 percent capacity, although the morning and noon activities are near capacity. At the present level of operations each meal/snack served is allocated a fixed cost of $0.25.
Required:
a. What nonfinancial factors should be considered by the owner?
b. Given your concerns listed in part a., should the offer be accepted? Why or why not?

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Definitions:

Consistent

Referring to a principle in accounting that requires the same accounting methods to be applied in the financial statements period over period.

Neutral

A position or stance that does not favor either side in a dispute, competition, or selection.

Information Rehearsal

The mental process of repeatedly going over information in order to remember it.

Memory Retrieval

The process of recalling or bringing into consciousness information from memory storage.