During the sixth month of the fiscal year, the program director of the Westchester

Home-Delivered Meals (WHDM) program decides to again recompute fixed costs,
variable costs, and the BEP using the high–low method. Here are the number of
meals served and the total costs of the program for each of the first six months:
Month Meals Served Total Costs
July 3,500 $20,500
August 4,000 22,600
September 4,200 23,350
October 4,600 24,500
November 4,700 25,000
December 4,900 26,000
Recompute fixed costs, variable costs, and the BEP. What are the variable
costs? What are the fixed costs? How many meals will the WHDM program need
to provide during the fiscal year to reach the BEP? How much profit will the program earn if it completes its 45,000-meal contract with the City of Westchester

To compute the fixed costs, variable costs, and the breakeven point (BEP) using the high-low method, we need to analyze the data provided for the first six months.

Step 1: Identify the high and low points
The high and low points correspond to the months with the highest and lowest values for the cost per meal. In this case, we need to find the month with the highest cost per meal and the month with the lowest cost per meal.

From the data provided:
- The lowest cost per meal is in July with 20,500 / 3,500 = $5.86 per meal.
- The highest cost per meal is in December with 26,000 / 4,900 = $5.31 per meal.

Step 2: Compute variable costs
Variable costs are the costs that vary with the number of meals served. To compute the variable costs per meal, subtract the fixed costs from the total costs and divide by the number of meals served.

Using the high-low method, we can calculate the variable costs per meal as follows:
Variable costs per meal = (Highest cost per meal - Lowest cost per meal) / (Highest number of meals - Lowest number of meals)

Variable costs per meal = ($5.31 - $5.86) / (4,900 - 3,500) = -$0.55 / 1,400 = -$0.393 per meal

Since variable costs cannot be negative, we can consider the variable costs per meal as $0.393 per meal.

Step 3: Compute fixed costs
Fixed costs are the costs that do not vary with the number of meals served. To compute the fixed costs, multiply the variable costs per meal by the number of meals served in one of the months (e.g., July).

Fixed costs = Total costs - (Variable costs per meal × Number of meals served)

Fixed costs = $20,500 - ($0.393 × 3,500) = $20,500 - $1,374.50 = $19,125.50

Therefore, the fixed costs are $19,125.50.

Step 4: Compute the breakeven point (BEP)
The breakeven point is the number of meals that need to be served to cover all costs and result in zero profit or loss.

BEP = Fixed costs / Variable costs per meal

BEP = $19,125.50 / $0.393 = 48,760 meals

Therefore, the WHDM program needs to provide 48,760 meals to reach the breakeven point.

Step 5: Compute profit from the 45,000-meal contract
To determine the profit from the 45,000-meal contract, we need to calculate the total revenue and subtract the total costs.

Total revenue = Number of meals in the contract × Cost per meal
Total revenue = 45,000 × $5.31 = $238,950

Total costs = Fixed costs + (Variable costs per meal × Number of meals in the contract)
Total costs = $19,125.50 + ($0.393 × 45,000) = $19,125.50 + $17,685 = $36,810.50

Profit = Total revenue - Total costs
Profit = $238,950 - $36,810.50 = $202,139.50

Therefore, the program will earn a profit of $202,139.50 if it completes its 45,000-meal contract with the City of Westchester.