The Nature Company provides landscaping services to corporations and businesses. All its landscaping work requires Nature to use landscapingequipment. Its landscaping equipment has the capacity to do 14,500 hours of landscaping work. It currently anticipates getting orders that wouldutilize 13,500 hours of equipment time. Nature charges $115 per hour for landscaping work. Cost information for the current expected activity levelis as follows:RequirementIn order to fill its available capacity, Nature's salespersons are trying to find newbusiness. Donna Corporation wants Nature to do 2,300 hours of landscaping workfor $66 per hour. Variable landscaping costs for the Donna Corporation order are$40 per hour and variable marketing costs are 4% of revenues. Nature can acceptas much or as little of the 2,300 hours of Donna's landscaping work. What shouldNature Corporation do?X Data tableRevenues ($115 x 13,500 hours)Variable landscaping costs (largely labor), which vary with the numberof hours worked ($64 per hour * 13,500 hours)Fixed landscaping costsVariable marketing costs (4% of revenues)Fixed marketing costsTotal costsOperating income$ 1,552,500$864,000148,50062,10071,0001,145,600406,900X

In this decision making fixed costs are not relevant but variable costs and contribution margin…

Answered: The Nature Company provide

Business

Accounting

The Nature Company provide

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 2CE: Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each...

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Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each agent is paid 28,000 per year and is able to process 4,000 purchase orders. Last year, 17,800 purchase orders were processed by the five agents. Required: 1. Calculate the activity rate per purchase order. 2. Calculate, in terms of purchase orders, the: a. total activity availability b. unused capacity 3. Calculate the dollar cost of: a. total activity availability b. unused capacity 4. Express total activity availability in terms of activity capacity used and unused capacity. 5. What if one of the purchasing agents agreed to work half time for 14,000? How many purchase orders could be processed by four and a half purchasing agents? What would unused capacity be in purchase orders?
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Borges Machine Shop, Inc., has a 1-year contract for the production of 75,000 gear housings for a new off-road vehicle. Owner Luis Borges hopes the contract will be extended and the volume increased next year. Borges has developed costs for three alternatives. They are general-purpose equipment (GPE), flexible manufacturing system (FMS), and expensive, but efficient, dedicated machine (DM) The cost data follow General Purpose Equipment (GPE) Flexible Manufacturing System (FMS) 75,000 $125,000 $15.00 Annual contracted units Annual fixed cost Per unit vanable cost Based on the total cost, the process that is best suited for the current contracted volume is Suppose the contracted volume changes to 275,000 gear housings. Based on the total cost, the process that is best suited for the new volume is Suppose the contracted volume changes to 375,000 gear housings. Based on the total cost, the process that is best suited for the new volume is Dedicated Machine (DM) 75,000 $225,000 $14.00…
Bodine Corp. has a contract to deliver cleaning products to the community center. The contract with the aquatic center states that the first 500 gallons of cleaner will cost $16 per gallon. However, the cost will drop to $12 per gallon for all purchases over 500 gallons. Based on its experience, Bodine Corp. estimates that the center will use 800 gallons of chemicals. What transaction price per gallon should Chlorine use for this contract?
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