Question
Rodeo has two main customers: Trent Corporation and Julie Corporation. The data for each customer for January are: Trent Corporation Julie Corporation Revenues $210,000 $140,000
Rodeo has two main customers: Trent Corporation and Julie Corporation. The data for each customer for January are: Trent Corporation Julie Corporation Revenues $210,000 $140,000 Total Variable costs $350,000 84,000 85,000 Contribution margin 169,000 126,000 55,000 Fixed costs ( allocated) 181,000 102,000 68,000 Operating income 170,000 $24,000 $13,000 Machine $11,000hours required 3,000 hours 1,000 hours 4,000 hours Julie Corporation indicates that it wants Rodeo to do an additional $140,000 worth of printing jobs during February. These jobs are identical to the existing business Rodeo did for Julie in January in terms of variable costs and machine-hours required. Rodeo anticipates that the business from Trent Corporation February will be the same as that in January. Rodeo can choose to accept as much of the Trent and Julie business for February as its capacity allows. Assume that total machine-hours and fixed costs for February will be the same as in January. What action should Rodeo take to maximize its operating income? Show your calculations. What other factors should Rodeo consider before making a decision?
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