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The Gannett Company provides landscaping services to corporations and businesses. All its landscaping work requires Gannett to use landscaping equipment. Its landscaping equipment has the
The Gannett Company provides landscaping services to corporations and businesses. All its landscaping work requires Gannett to use landscaping equipment. Its landscaping equipment has the capac to do 14,000 hours of landscaping work. It currently anticipates getting orders that would utilize 13,200 hours of equipment time from existing customers. Gannett charges $115 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 operating income without the special order. Next, calculate operating income with the special order, and then determine whether Gannett should accept or reject the special order. Gannett should the special order from Gerald Corporation because operating income will by Revenues ($11513,200 hours) Variable landscaping costs (largely labor), which vary with the number of hours worked ( $60 per hour 13,200 hours) Fixed landscaping costs Variable marketing costs ( 5% of revenues) Fixed marketing costs Total costs Operating income $1,518,000792,000110,00075,90074,0001,051,900$466,100 Gannett has received an order for landscaping work from Gerald Corporation at $80 per hour that would require 4,600 hours of equipment time. Variable landscaping costs for the Gerald Corporation order are $60 per hour and variable narketing costs are 5% of revenues. Gannett can either accept the Gerald offer in whole or reject it. Should Gannett accept the offer? Gannett has received an order for landscaping work from Gerald Corporation at $80 per hour that would require 4,600 hours of equipment time. Variable landscaping costs for the Gerald Corporation order are $60 per hour and variable narketing costs are 5% of revenues. Gannett can either accept the Gerald offer in whole or reject it. Should Gannett accept the offer
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