Question 2

Jackson Inc. disposes of other companies toxic waste. Currently, Jackson loads the waste by hand into a truck, which requires labor of $15 per load. Jackson is considering a machine that would reduce the amount of time needed to load the waste. The machine would cost $154,500 but would reduce labor cost to $4 per load. Assume that Jackson averages 10,300 loads per year. How many years would it take for Jackson to recover the cost of the new machine? (Round your answer to 2 decimal places.)

Adams Furniture receives a special order for 10 sofas for a special price of $5,000. The direct materials and direct labor for each sofa are $200. In addition, supervision and other fixed overhead costs average $250 per sofa.

a1. What is the impact on operating income from accepting the special order?

a2. Based solely on a short-term financial analysis, should Adams accept the special order?

b1. If Adams is currently operating at full capacity, what would be the opportunity cost per unit for lost sales to regular customers if the special sales order is accepted and the selling price per unit on regular sales equals $650?

b2. Based solely on a short-term financial analysis, should Adams accept the special order if it is currently operating at full capacity?