Packer Concrete Company pours concrete slabs for single-family dwellings. Wolff

Question

Packer Concrete Company pours concrete slabs for single-family dwellings. Wolff Construction Company, which operates outside Packer's normal sales territory, asks Packer to pour 54 slabs for Wolf's new development of homes. Packer has the capacity to build 460 slabs and is presently working on 170 of them. Wolff is willing to pay only $2,610 per slab. Packer estimates the cost of a typical job to include unit-level materials, $820, unit-level labor, S410, and an allocated portion of facility-level overhead, $750. Required Calculate the contribution to profit from the special order. Contribution to profit

Explanation / Answer

The contribution would be as under:

Sale price - $ 2,610

Less: Material - $ 820

Less: Labour - $ 410

Contribution per slab - $ 1,380

Total contribution = $ 1,380 X 54 slabs= $ 74,520

Kindly note that for the purpose of new project decision making, fixed cost is not considered as it is only an allocation and not additional expense. Even if the new project is not taken up, the fixed cost will get incurred

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