In-Class Demos Ch 6

In-Class Demos Ch 6 - In-Class Exercises - Chapter...

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Unformatted text preview: In-Class Exercises - Chapter 6Exercise 6-5ANorman Concrete Company pours concrete slabs for single-family dwellings. Wayne Construction Company, which operates outside Norman's normal sales territory, asks Norman to pour 40 slabs for Wayne's new development of homes. Norman has the capacity to build 300 slabs and is presently working on 250 of them. Wayne is willing to pay only $2,500 per slab. Norman estimates the cost of a typical job to include unit-level materials, $1,000; unit-level labor, $600; and an allocated portion of facility-level overhead, $700.Required: Should Norman accept or reject the special order to pour 40 slabs for $2,500 each? Support your answer with appropriate computations.Relevant (Differential) RevenueRelevant Cost(Avoidable)DecisionRelevant Revenue > Relevant cost +ve Contribution $900/slabAccept Special Order$36,000Unavoidable Irrelevant>Exercise 6-5ANorman Concrete Company pours concrete slabs for single-family dwellings. Wayne Construction Company, which operates outside Norman's normal sales territory, asks Norman to pour 40 slabs for Wayne's new development of homes. Norman has the capacity to build 300 slabs and is presently working on 250 of them. Wayne is willing to pay only $2,500 per slab. Norman estimates the cost of a typical job to include unit-level materials, $1,000; unit-level labor, $600; and an allocated portion of facility-level overhead, $700.Required: Should Norman accept or reject the special order to pour 40 slabs for $2,500 each? Support your answer with appropriate computations.Relevant Revenue and CostsSales revenue ($2,500 x 40 slabs)$100,000Cost of raw materials($1,000 x 40 slabs)(40,000)Cost of direct labor ($600 x 40 slabs)(24,000)Contribution to profit$ 36,000Accept Special OrderNorman Concrete Company pours concrete slabs for single-family dwellings. Wayne Construction Company, which operates outside Norman's normal sales territory, asks Norman to pour 40 slabs for Wayne's new development of homes. Norman has the capacity to build 300 slabs and is presently working on 250 of them. Wayne is willing to pay only $2,500 per slab. Norman estimates the cost of a typical job to include unit-level materials, $1,000; unit-level labor, $600; and an allocated portion of facility-level overhead, $700.Required: Should Norman accept or reject the special order to pour 40 slabs for $2,500 each? Support your answer with appropriate computations....
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In-Class Demos Ch 6 - In-Class Exercises - Chapter...

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