The Gannett Company provides landscaping services to corporations and businesses. All its landscaping work requires Gannett to use landscaping equipment. Its landscaping equipment has the capacity to do 14,000 hours of landscaping work. It is currently utilizing 13,200 hours of equipment time. Gannett charges $115 per hour for landscaping work. Cost information for the current activity level is as follows:
The Gannett Company provides landscaping services to corporations and businesses. All its landscaping work requires Gannett to use landscaping equipment. Its landscaping equipment has the capacity to do 14,000 hours of landscaping work. It is currently utilizing 13,200 hours of equipment time. Gannett charges $115 per hour for landscaping work. Cost information for the current activity level is as follows:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![The Gannett Company provides landscaping services to corporations and businesses. All its landscaping work requires Gannett
to use landscaping equipment. Its landscaping equipment has the capacity to do 14,000 hours of landscaping work. It is currently
utilizing 13,200 hours of equipment time. Gannett charges $115 per hour for landscaping work. Cost information for the current
activity level is as follows:
Begin by determining the change in operating income if Gannett accepts the special order. (If an input field is not used in
the table, leave the input field empty; do not select a label or enter a zero. Use parentheses or a minus sign to enter a decrease in
operating income.)
Less:
Increase (decrease) in operating income by accepting the one-time special order
Should Gannett accept the special order from Flora Corporation?
Will operating income increase or decrease?
By how much?
Data table
Revenues ($115 x 13,200 hours)
Variable landscaping costs (largely labor), which vary with the number
of hours worked ($60 per hour x 13,200 hours)
Fixed landscaping costs
Variable marketing costs (5% of revenues)
Fixed marketing costs
Total costs
Operating income
Requirement
Print
Done
$ 1,518,000
792,000
110,000
75,900
74,000
1,051,900
$
466,100
Gannett has just received a one-time only special order for landscaping work from
Flora Corporation at $65 per hour that would require 800 hours of equipment time.
No marketing costs will be necessary for the one-time only special order. Should
Gannett accept the offer even though revenue per hour is less than Gannett's
landscaping cost of $68.33 per hour [($792,000+ $110,000) + 13,200 hours)].
×
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Transcribed Image Text:The Gannett Company provides landscaping services to corporations and businesses. All its landscaping work requires Gannett
to use landscaping equipment. Its landscaping equipment has the capacity to do 14,000 hours of landscaping work. It is currently
utilizing 13,200 hours of equipment time. Gannett charges $115 per hour for landscaping work. Cost information for the current
activity level is as follows:
Begin by determining the change in operating income if Gannett accepts the special order. (If an input field is not used in
the table, leave the input field empty; do not select a label or enter a zero. Use parentheses or a minus sign to enter a decrease in
operating income.)
Less:
Increase (decrease) in operating income by accepting the one-time special order
Should Gannett accept the special order from Flora Corporation?
Will operating income increase or decrease?
By how much?
Data table
Revenues ($115 x 13,200 hours)
Variable landscaping costs (largely labor), which vary with the number
of hours worked ($60 per hour x 13,200 hours)
Fixed landscaping costs
Variable marketing costs (5% of revenues)
Fixed marketing costs
Total costs
Operating income
Requirement
Print
Done
$ 1,518,000
792,000
110,000
75,900
74,000
1,051,900
$
466,100
Gannett has just received a one-time only special order for landscaping work from
Flora Corporation at $65 per hour that would require 800 hours of equipment time.
No marketing costs will be necessary for the one-time only special order. Should
Gannett accept the offer even though revenue per hour is less than Gannett's
landscaping cost of $68.33 per hour [($792,000+ $110,000) + 13,200 hours)].
×
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