LON-CAPA%20#5 Special Order Decision

LON-CAPA%20#5 Special Order Decision - This is a special...

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Unformatted text preview: This is a special order problem that deals with a service rather than a product. But the concepts for determining the profit from the special order remain the same. And the ultimate question still is: Should the special offer that this customer makes be accepted or not? For guidance, use the example in the Special Order lecture and study problems 5-A1 and 5-B1. As with almost all of the analyses that we have done, determining what costs are variable and what costs are fixed is a critical part of the analysis. ______________________________________________________ Preston Concrete is a major supplier of concrete to residential and commercial builders in the Pacific Northwest. The company s general pricing policy is to set prices at $119 per cubic yard. Estimated deliveries for 2007 were 390,000 cubic yards. Estimated total costs for 2007 included: Material costs $26,052,000 Yard operation costs $5,343,000 Administrative costs $2,301,000 $1,170,000 of the estimated yard operation costs were fixed, and all of the administrative costs were fixed. In addition to the costs listed in the table, there $1,170,000 of the estimated yard operation costs were fixed, and all of the administrative costs were fixed....
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