Revenues ($85 x 11,500 hours)

$977,500

The Denali Company provides landscaping services to corporations and businesses. All its landscaping work requires Denali to use landscaping equipment. Its landscaping equipment has the capacity to do

13,000 hours of landscaping work. It currently anticipates getting orders that would utilize

11,500 hours of equipment time from existing customers.

Denali charges $85 per hour for landscaping work. Cost information for the current expected activity level is as follows:

Variable landscaping costs (including materials and labour), which vary with the number of hours worked ($52 per hour x 11,500 hours)

598,000

Fixed landscaping costs

105,000

Variable marketing costs (5% of revenues)

48,875

Fixed marketing costs

75,000

Total costs

826,875

Operating income

$150,625

-Denali has received an order for landscaping work from Nancy Corporation at $64 per hour that would requir 2,900 hours of equipment time. Variable landscaping costs for the

Nancy Corporation order are $52 per hour and variable marketing costs are

5% of revenues. Denali can either accept the Nancy offer in whole or reject it. Should Denali accept the offer?

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

Denali

should accept or reject the special order.

		Without One-Time Only Special Order	With One-Time Only Special Order
Relevant revenues
Relevant variable costs:
	Landscaping costs
	Marketing costs
Total relevant costs
Relevant operating income

Part 2

Denali

should

accept

reject

the special order from

Nancy

Corporation because operating income will

decrease

increase

by

$enter your response here.