Question

Benson Concrete Company pours concrete slabs for single-family dwellings. Lancing Construction Company, which operates outside Benson’s normal sales territory, asks Benson to pour 49 slabs for Lancing’s new development of homes. Benson has the capacity to build 430 slabs and is presently working on 190 of them. Lancing is willing to pay only $2,590 per slab. Benson estimates the cost of a typical job to include unit-level materials, $860; unit-level labor, $580; and an allocated portion of facility-level overhead, $1,210. Calculate the contribution to profit from the special order. Should Visburg accept or reject the special order to pour 40 slabs for $3, 300 each?

Answer 1

Answer:

It should accepted.

Explanation:

$\left[\begin{array}{cccc}&Units&Cost&Total\\ Special Order&49&2,590&126,910\\ Variable Cost&49&1,440&-70,560\\ rejected local&&&0\\ additional cost&&&0\\ Net Income&&&56350\\\end{array}\right]$

We will compare the Special order with the variable cost associate with their productions.

As the orders has a postive income after variables expenses it should be accepted as contributes with the payment of fixed cost and this sales wasn't planned when solvign for the cost. Not doing the sale will avoid the comapny the opportunity of a profitable business cappable of allocate more fixed cost.