g. Special-Order Pricing Barry’s Bar-B-Que is a popular lunch time spot. Barry is conscientiousabout the quality of his meals, and he has a regular crowd of 600 patrons for his $5 lunch. His variablecost for each meal is about $2, and he figures his fixed costs, on a daily basis, are about $1,200. Fromtime to time, bus-tour groups with 50 patrons stop by. He has welcomed them because he has capacityto seat 700 diners in the average lunch period, and his cooking and wait staff can easily handle theadditional load. The tour operator generally pays for the entire group on a single check to save the waitstaff and cashier the additional time. Due to competitive conditions in the tour business, the operatoris now asking Barry to lower the price to $3.50 per meal for each of the 50 bus-tour members.Required1. What is the incremental profit (loss) per bus-tour meal? Should Barry accept the bus-tour offer?2. What if the tour company were willing to guarantee 200 patrons (or four bus loads) at least once a monthfor $3.00 per meal? What is the incremental profit (loss) for each meal? Is the offer financially attractive?
g. Special-Order Pricing Barry’s Bar-B-Que is a popular lunch time spot. Barry is conscientious
about the quality of his meals, and he has a regular crowd of 600 patrons for his $5 lunch. His variable
cost for each meal is about $2, and he figures his fixed costs, on a daily basis, are about $1,200. From
time to time, bus-tour groups with 50 patrons stop by. He has welcomed them because he has capacity
to seat 700 diners in the average lunch period, and his cooking and wait staff can easily handle the
additional load. The tour operator generally pays for the entire group on a single check to save the wait
staff and cashier the additional time. Due to competitive conditions in the tour business, the operator
is now asking Barry to lower the price to $3.50 per meal for each of the 50 bus-tour members.
Required
1. What is the incremental
2. What if the tour company were willing to guarantee 200 patrons (or four bus loads) at least once a month
for $3.00 per meal? What is the incremental profit (loss) for each meal? Is the offer financially attractive?
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