Question
Problem 6-24A Context-sensitive relevance LO 6-1 Bennett Construction Company is a building contractor specializing in small commercial buildings. The company has the opportunity to accept
Problem 6-24A Context-sensitive relevance LO 6-1 Bennett 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 Bennett 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 Job A Job B Contract price $ 820,000 $ 694,000 Unit-level materials 244,300 224,950 Unit-level labor 249,350 305,900 Unit-level overhead 19,800 13,100 Supervisors salary 115,870 115,870 Rental equipment costs 26,500 28,900 Depreciation on tools (zero market value) 20,500 20,500 Allocated portion of companywide facility-sustaining costs 11,600 10,300 Insurance cost for job 16,900 16,900 Required: a-1. Calculate the contribution to profit from Job A and Job B. (Negative amounts should be indicated by a minus sign.) Contribution to profit (loss) Job A Job B a-2. Assume that Bennett has decided to accept one of the two jobs. Recommend which job to accept? Job A Job B b-1. Assume that Job A is no longer available. Bennett choice is to accept or reject Job B alone. Calculate the contribution to profit from Job B. (Negative amount should be indicated by a minus sign.) Job B Contribution to profit (loss) b2. b-2. Based on your answer to requirement b-1, recommend whether to accept or reject Job B. Accept or Reject
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