Question
The Nature Company provides landscaping services to corporations and businesses. All its landscaping work requires Nature to use landscaping equipment. Its landscaping equipment has
The Nature Company provides landscaping services to corporations and businesses. All its landscaping work requires Nature to use landscaping equipment. Its landscaping equipment has the capacity to do 15,000 hours of landscaping work. It currently anticipates getting orders that would utilize 10,500 hours of equipment time from existing customers. Nature charges $110 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 the determine whether Nature should accept or reject the special order. With Relevant revenues Without One-Time Only Special Order One-Time Only Special Order $ 1,155,000 Data table Relevant variable costs: Landscaping costs Marketing costs 787,500 69,300 856,800 Total relevant costs 298,200 Relevant operating income Revenues ($110 x 10,500 hours) Variable landscaping costs (largely labor), which vary with the number of hours worked ($75 per hour x 10,500 hours) Fixed landscaping costs Variable marketing costs (6% of revenues) Fixed marketing costs Total costs Operating income Print Done $ 1,155,000 787,500 105,000 69,300 74,000 1,035,800 $ 119,200 X
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