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 $19,000. The size of the proposed job is 32,000 square feet. The company's normal service costs are as follows:

If the company accepts the special offer:

Multiple Choice

The company will lose $6,920 on the job.

The company will lose $13,320 on the job.

The company will lose $1,160 on the job.

The company will earn $10,040 on the job

Unit-level materials $ 0.28 per square foot Unit-level labor $ 0.35 per square foot Unit-level variable overhead $ 0.18 per square foot Facility-level overhead Allocated at $0.20 per square foot

Explanation / Answer

Answer is $6920 Loss

FIxed overhead is not considered as they will continue to occur even if offer is not accepted.

Particulars Amt Revenue    19,000.00 Less:   Material (32000 x 0.28)      8,960.00 Labor (32000 x 0.35)    11,200.00 Overhead (32000 x 0.18)      5,760.00 Loss    (6,920.00)

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