Correct option is: The company will lose $19,020 on the job | |||
Workings: | |||
Cost per square feet: | |||
Direct Material | = | $ 0.39 | |
Add: | Direct Labor | = | $ 0.46 |
Add: | Variable Manufacturing overhead | = | $ 0.29 |
(i) | Cost per square feet | = | $ 1.14 |
(ii) | Size of proposed job | = | 43,000 |
(i) X (ii) | Total Cost | = | $ 49,020 |
Revenue | = | $ 30,000 | |
Less: | Total Cost | = | $ 49,020 |
Loss | = | $-19,020 | |
The company will lose $19,020 on the job |
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Huang Automotive is presently operating at 75% of capacity. The company recently received an offer from a Korean truck manufacturer to purchase 26,000 units of a power steering system component for $200 per unit. Peter Wu, vice-president of sales, notes that although there will be an additional $2.25 shipping cost for each component, he thinks that accepting the order will get the company's "foot in the door" of an expanding international market. To determine variable and fixed costs, Huang's accountant...