chapter6 VA Q 9

Solomon Construction Company is a building contractor specializing in small commercial buildings. The company has the opportunity to accept one of two jobs; it cannot accept both because they must be performed at the same time and Solomon does not have the necessary labor force for both jobs. Indeed, it will be necessary to hire a new supervisor if either job is accepted. Furthermore, additional insurance will be required if either job is accepted. The revenue and costs associated with each job follow. Cost Category Contract price Unit-level materials Unit-level labor Unit-level overhead Supervisor's salary Rental equipment costs Depreciation on tools (zero market value) Allocated portion of company-wide facility-sustaining costs Insurance cost for job Job A $814,000 244,600 250,450 18,700 116,170 25,100 21,400 10,500 17,100 Job B $683,000 223,650 305,600 13,700 116,170 28,600 21,400 9,700 17,100 Required a. Assume that Solomon has decided to accept one of the two jobs. Fill in the information relevant to selecting one job versus the other. Recommend which job to accept. b. Assume that Job A is no longer available. Solomon's choice is to accept or reject Job B alone. Fill in the information relevant to this decision. Recommend whether to accept or reject Job B. Required A Required B Assume that Solomon has decided to accept one of the two jobs. Fill in the information relevant to selecting one job versus the other. (Negative amounts should be indicated by a minus sign.) Decision Job A Job B Contract price Unit-level materials Unit-level labor Unit-level overhead Supervisor's salary Rental equipment costs Depreciation on tools (zero market value) Allocated portion of companywide facility-sustaining costs Insurance cost for job Contribution to profit (loss) Recommend which job to accept? Required A Required B Assume that Job A is no longer available. Solomon's choice is to accept or reject Job B alone. Fill in the information relevant to this decision. (Negative amounts should be indicated by a minus sign.) Decision Job B. Contract price Unit-level materials Unit-level labor Unit-level overhead Rental equipment costs Depreciation on tools (zero market value) Allocated portion of companywide facility-sustaining costs Supervisor's salary Insurance cost for job Contribution to profit (loss) Recommend whether to accept or reject job B?