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Demonstration_Problems_for_Chapter_4

Demonstration_Problems_for_Chapter_4 - Demonstration...

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Demonstration Problems for Chapter 4 Demonstration Problem 4-1 Special Order Davis Driveways, Inc. (DDI) pours concrete driveways for single family homes. DDI uses a cost-plus pricing approach. The company’s accountant prepared the following report showing how DDI established the price per driveway at $350. A new builder in town, Rachel Rodgers, has acquired a large tract of land upon which she intends to build 200 single family homes. Ms. Rodgers offers to purchase all 200 driveways from DDI. However, she is willing to pay only $250 per driveway. Required Assume your group is a management team responsible for deciding whether to accept or reject Ms. Rodgers’ offer. Develop a response, support your decision with appropriate computations, and choose a spokesperson to explain your answer. $250 Material ($100) Labor ($120)   $30     x 200 = $6,000 Davis Driveways, Inc. Cost Plus Pricing Policy Materials $100 Labor 120 Overhead* 80 Total $300 Desired Profit 50 Price $350
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