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The Himalaya Company provides landscaping services to corporations and businesses. All its landscaping work requires Himalaya to use landscaping equipment. Its landscaping equipment has the
The Himalaya Company provides landscaping services to corporations and businesses. All its landscaping work requires Himalaya to use landscaping equipment. Its landscaping equipment has the capacity to do 10.500 hours of landscaping work. It currently anlicipales gelling orders that would ulilize 9,100 hours of equipment Lime from existing customers. Himalaya charges S105 per hour for landscaping work. Cost informalion for the current expected aclivity 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 compulalion of the company's operating income without the special order. Next, calculale operating incorne with the special order, and then delermine whether Himalaya should accept or reject the special order. Without One-Time Only Special Order $ 955,500 With One-Time Only Special Order Relevant revenues Relevant variable costa: Landscaping costs Marketing costs 837,000 47,775 684,775 270,725 Total relevant costs Relevant operating income 955,500 637,000 Revenues ($105 x 9,100 hours) Variable landscaping costs (including materials and labor), which vary with the number of hours worked ($70 per hour x 9,100 hours) Fixed landscaping costs Variable marketing costs (5% of revenues) 125,000 47,775 67,000 Fixed marketing costs Total costs 876,775 78,725 Operating income Requirement Himalaya has received an order for landscaping work from Ashley Corporation at $66 per hour that would require 2,800 hours of equipment time. Variable landscaping costs for the Ashley Corporation order are $70 per hour and variable marketing costs are 5% of revenues. Himalaya can either accept the Ashley offer in whole or reject it. Should Himalaya accept the offer? Print Done
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