Question

Clean, Inc. cleans and waxes floors for commercial customers. The company is presently operating at less than capacity with equipment and employees idle at times. The company recently received an order from a potential customer outside the company's normal geographic service region for a price of $30,000. The size of the proposed job is 43,000 square feet. The company's normal service costs are as follows: Unit-level materials Unit-level labor Unit-level variable overhead Facility-level overhead $0.39 per square foot $0.46 per square foot $0.29 per square foot Allocated at $0.31 per square foot If the company accepts the special offer: Multiple Choice The company will lose $19,020 on the job. o ooo The company will lose $32,350 on the job. C) The company will lose $6,550 on the job. The company will earn $13,230 on the job.

Answer 1

	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