Part $1$ of $3$

Points: $0$ of $1$

The Crestone Company provides landscaping services to corporations and businesses. All its landscaping work requires Crestone to use landscaping equipment. Its landscaping equipment has the capacity to do $11,500$ hours of landscaping work. It currently anticipates getting orders that would utilize $10,500$ hours of equipment time from existing customers. Crestone charges $$110$ per hour for landscaping work. Cost information for the current expected activity level is as follows:

Begin by completing an analysis, and start by showing the computation of the company's operating income without the special order. Next, calculate operating income with the special order, and then determine whether Crestone should accept or reject the special order.

Without

One$-$Time Only

Special Order

Relevant revenues

Relevant variable costs:

Landscaping costs

Marketing costs

Total relevant costs

Relevant operating income

Data table

Revenues $($ $$11010,500$ hours$)$

Variable landscaping costs $($largely labor$),$ which vary with the number of hours worked $($ $$75$ per hour $10,500$ hours$)$

Fixed landscaping costs

Variable marketing costs $(7\%$ of revenues$)$

Fixed marketing costs

Total costs

Operating income

Requirement

Crestone has received an order for landscaping work from Sophia Corporation at $$64$ per hour that would require $2,100$ hours of equipment time. Variable landscaping costs for the Sophia Corporation order are $$75$ per hour and variable marketing costs are $7\%$ of revenues. Crestone can either accept the Sophia offer in whole or reject it$.$ Should Crestone accept the offer?

$\backslash$table$[[$$$1,155,000$