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In connection with surfacing a new highway, a contractor has a choice of two sites on which to set up the mixing plant equipment. The contractor estimates that it will cost P51.75 per cubic meter per kilometer to haul the asphalt paving material from the mixing plant to the job site.

In connection with surfacing a new highway, a contractor has a choice of two sites on which to set up the mixing plant equipment. The contractor estimates that it will cost P51.75 per cubic meter per kilometer to haul the asphalt paving material from the mixing plant to the job site.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter7: Allocating Costs Of Support Departments And Joint Products
Section: Chapter Questions
Problem 5CE: Refer to Cornerstone Exercise 7.3. Now assume that Valron Company uses the reciprocal method to...
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. In connection with surfacing a new highway, a
contractor has a choice of two sites on which to
set up the mixing plant equipment.
The contractor estimates that it will cost P51.75
per cubic meter per kilometer to haul the asphalt
paving material from the mixing plant to the job
site.
If site B is selected, there will be an added
charge of P600 per day for a flagman and it needs 2 flagman.
The job requires 50,000 cubic meters of mixed
asphalt paving material. It is estimated that four
months (17 weeks of five working days per
week) will be required for the job.

 

Cost Factors Site A Site B Average hauling distance 6 km 4.3 km Monthly rental of site P45,000 P225,000 Cost to setup and remove equipment P675,000 P1,125,000 Hauling expense P51.75/ Cu.m/km P51.75 / Cu.m/km a) Compare the two sites in terms of their fixed, variable, and total costs. b) For the selected site, how much profit can be made if it is paid P362.25 per cubic meter delivered to the job site? (solution to a) Fixed Costs Site A Site B Monthly rental of site Cost to setup and remove equipment Flagman wage Total Fixed Costs Variable Costs Site A Site B Hauling expense Total Costs Site A Site B Fixed + Variable What site is better? Sol'n to b REVENUE = ? PROFIT = ?
Transcribed Image Text:Cost Factors Site A Site B Average hauling distance 6 km 4.3 km Monthly rental of site P45,000 P225,000 Cost to setup and remove equipment P675,000 P1,125,000 Hauling expense P51.75/ Cu.m/km P51.75 / Cu.m/km a) Compare the two sites in terms of their fixed, variable, and total costs. b) For the selected site, how much profit can be made if it is paid P362.25 per cubic meter delivered to the job site? (solution to a) Fixed Costs Site A Site B Monthly rental of site Cost to setup and remove equipment Flagman wage Total Fixed Costs Variable Costs Site A Site B Hauling expense Total Costs Site A Site B Fixed + Variable What site is better? Sol'n to b REVENUE = ? PROFIT = ?
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