# Managerial Accounting: Nature's Garden, a new restaurant situated on a busy highway

Managerial Accounting

Nature's Garden, a new restaurant situated on a busy highway in Pomona, California, specializes in a chef's salad selling for \$7.00. Daily fixed costs are \$1,200, and variable costs are \$4.00 per meal. With a capacity of 800 meals per day, the restaurant serves an average of 750 meals each day.

a) Determine the current average costs per meal.
b) A busload of 30 Girl Scouts stops on its way home from the San Bernardino National Forest. The leaders offers to bring them in if the scouts can all be served a meal for a total of \$150. The owner refuses, saying he would lost \$0.60 per meal if he accepted this offer. How do you think the owner arrived at the \$0.60 figure? Comment on owner's reasoning.
c) A local businessman on break overhears the conversation with the leader and offers the owner a one-year contract to feed 300 of the businessman's employees one meal each day at a special price of \$4.50 per meal. Should the restaurant owner accept this offer? Why or why not?