Clean, Inc. cleans and waxes floors for commercial customers. The company is pre

Question

Clean, Inc. cleans and waxes floors for commercial customers. The company is presently operating at less than capacity with equipment and employees idle at times. The company recently received an order from a potential customer outside the company's normal geographic service region for a price of $15,000. The size of the proposed job is 28,000 square feet. The company's normal service costs are as follows: Unit-level materials Unit-level labor Unit-level variable overhead Facility-level overhead $0.24 per square foot $0.31 per square foot $0.14 per square foot Allocated at $0.16 per square foot If the company accepts the special offer: Multiple Choice The company will earn $8,280 on the job. The company will lose $400 on the job. The company will lose $8,800 on the job The company will lose $4,320 on the job.

Explanation / Answer

Incremental analysis :

so answer is d) The company will lose $4320 on the job

Incremental revenue 15000 Incremental cost Direct material (28000*.24) 6720 Direct labour (28000*0.31) 8680 Variable overhead (28000*.14) 3920 Total incremental cost 19320 Incremental loss -4320

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