Business, 25.12.2019 06:31, martinezkimberly706
The rainier company provides landscaping services to corporations and businesses. all its landscaping work requires rainier to use landscaping equipment. its landscaping equipment has the capacity to do 10,000 hours of landscaping work. it currently anticipates getting orders that would utilize 9,000 hours of equipment time from existing customers. rainier charges $80 per hour for landscaping work. cost information for the current expected activity level is as follows:
revenues ($80 x 9,000 hours) $720,000
variable landscaping costs (including materials and labor), which vary 450,000
with the number of hours worked ($50 per hour x 9,000 hours)
fixed landscaping costs 108,000
variable marketing costs (5% of revenues) 36,000
fixed marketing costs 72,000
total costs 666,000
operating income $54,000
begin by completing an analysis, and start by showing the computation of the company's contribution margin without the landscaping work from
hudsonhudson.
next, calculate the contribution margin of the special order.
contribution margin for
existing landscape
customers
revenues
variable costs:
landscaping costs
marketing costs
total variable costs
contribution margin
contribution margin for
hudson corporation
landscaping work
determine the contribution margin per hour for existing customers. (enter amounts to the nearest cent.)
/
=
contribution margin per hour for existing customers
/
=
per hour
determine the contribution margin per hour for
hudson'shudson's
order and then determine whether
rainierrainier
should do any landscaping work for
hudsonhudson
corporation. (enter amounts to the nearest cent.)
/
=
contribution margin per hour for hudson's order
/
=
per hour
to maximize operating income, rainier should allocate as much of its capacity to customers who generate the
contribution margin per unit. that is, rainier should first allocate equipment capacity to
and only
the balance to
.
rainier maximizes total contribution margin by allocating
hours of equipment capacity to existing customers and
to hudson corporation, for a total contribution margin of $
.
Answers: 2
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