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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
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 10,000 hours of landscaping work. It currently anticipates getting orders that would utilize 9.500 hours of equipment time. Crestone charges $95 per hour for landscaping work. Cost information for the current expected activity level is as follows: (Click the icon to view the cost information.) Read the requirement Begin by completing an analysis, and start by showing the computation of the company's contribution margin without the landscaping work from Bonnie. Next, calculate the contribution margin of the special order. (Calculate the contribution margin for the special order assuming there are no constraints on landscaping hours.) Contribution Margin for Existing Landscape - X Data table Customers Revenues $ $ 902,500 Variable costs Landscaping costs Marketing costs Revenues ($95 * 9.500 hours) Variable landscaping costs (largely labor), which vary with the number of hours worked ($70 per hour 9,500 hours) Fixed landscaping costs Variable marketing costs (5% of revenues) (% Fixed marketing costs Total costs 665,000 95,000 45,125 65,000 Total variable costs Contribution margin 870, 125 $ 32,375 Operating income Requirement Print Done In order to fill its available capacity, Crestone's salespersons are trying to find new business. Bonnie Corporation wants Crestone lo do 2.500 hours of landscaping work for $56 per hour. Varlable landscaping costs for the Bonnie Corporation order are $46 per hour and variable marketing costs are 5% of revenues. Crestone can accept as much or as little of the 2.500 hours of Bonnie's landscaping work. What should Crestone Corporation do
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