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 $25,000. The size of the proposed job is 38,000 square feet. The company's normal service costs are as follows:

Unit-level materials	$	0.34	per square foot
Unit-level labor	$	0.41	per square foot
Unit-level variable overhead	$	0.24	per square foot
Facility-level overhead	Allocated at $0.26 per square foot

If the company accepts the special offer:

Multiple Choice

• The company will lose $3,500 on the job.

• The company will lose $22,500 on the job.

• The company will earn $12,080 on the job.

• The company will lose $12,620 on the job.

Answer 1

Gain(Loss) from special order

= Special order cost - Variable costs

= 25,000 - [(0.34+0.41+0.24)*38,000]

= 25,000 - 37,620

= (12,620)

Option D