Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 31

Lance’s Diner has a hot lunch special each weekday and Sunday afternoon. Food and other variable costs for the lunch are $3.50, and the daily fixed costs are $1,000. Lance has an average of 500 customers per day. What is the lowest price Lance should charge for a special group of 200 that wants to come on Saturday for a family reunion? What should be the lowest price Lance charges on a normal weekly basis?

Step 1 of 4

Special order:

A special order is a order which is not considered as the part of the existing business of the company. Special order under consideration should be evaluated whether to accept the special order or not.

If the special order is accepted, then price to be charged from the special order should be taken into consideration. In special order incremental costs and benefits are considered as relevant.