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The Nature Company provide

The Nature Company provide

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The Nature Company provides landscaping services to corporations and businesses. All its landscaping work requires Nature to use landscaping equipment. Its landscaping equipment has the capacity to do 14,500 hours of landscaping work. It currently anticipates getting orders that would utilize 13,500 hours of equipment time. Nature charges $115 per hour for landscaping work. Cost information for the current expected activity level is as follows: Requirement In order to fill its available capacity, Nature's salespersons are trying to find new business. Donna Corporation wants Nature to do 2,300 hours of landscaping work for $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 accept as much or as little of the 2,300 hours of Donna's landscaping work. What should Nature Corporation do? X
Transcribed Image Text:The Nature Company provides landscaping services to corporations and businesses. All its landscaping work requires Nature to use landscaping equipment. Its landscaping equipment has the capacity to do 14,500 hours of landscaping work. It currently anticipates getting orders that would utilize 13,500 hours of equipment time. Nature charges $115 per hour for landscaping work. Cost information for the current expected activity level is as follows: Requirement In order to fill its available capacity, Nature's salespersons are trying to find new business. Donna Corporation wants Nature to do 2,300 hours of landscaping work for $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 accept as much or as little of the 2,300 hours of Donna's landscaping work. What should Nature Corporation do? X
Data table Revenues ($115 x 13,500 hours) Variable landscaping costs (largely labor), which vary with the number of hours worked ($64 per hour * 13,500 hours) Fixed landscaping costs Variable marketing costs (4% of revenues) Fixed marketing costs Total costs Operating income $ 1,552,500 $ 864,000 148,500 62,100 71,000 1,145,600 406,900 X
Transcribed Image Text:Data table Revenues ($115 x 13,500 hours) Variable landscaping costs (largely labor), which vary with the number of hours worked ($64 per hour * 13,500 hours) Fixed landscaping costs Variable marketing costs (4% of revenues) Fixed marketing costs Total costs Operating income $ 1,552,500 $ 864,000 148,500 62,100 71,000 1,145,600 406,900 X
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