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The Rainier Company provides landscaping services to corporations and businesses. 11-2 All its landscaping work requires Rainier to use landscaping equipment. Its land scaping equipment has the capacity to do 10,000 hours of landscaping work. It cur rently anticipates getting orders that would utilize 9,000 hours of equipment time from existing customers. Rainier charges $80 per hour for landscaping work. Cost information for the current expected activity level is as follows:

The Rainier Company provides landscaping services to corporations and businesses. 11-2 All its landscaping work requires Rainier to use landscaping equipment. Its land scaping equipment has the capacity to do 10,000 hours of landscaping work. It cur rently anticipates getting orders that would utilize 9,000 hours of equipment time from existing customers. Rainier charges $80 per hour for landscaping work. Cost information for the current expected activity level is as follows:

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 Rainier Company provides landscaping services to corporations and businesses. 11-2 All its landscaping work requires Rainier to use landscaping equipment. Its land scaping equipment has the capacity to do 10,000 hours of landscaping work. It cur rently anticipates getting orders that would utilize 9,000 hours of equipment time from existing customers. Rainier charges $80 per hour for landscaping work. Cost information for the current expected activity level is as follows:
The Rainier Company provides landscaping services to corporations and businesses. All its landscaping work requires Rainier to use landscaping equipment. Its land- scaping equipment has the capacity to do 10,000 hours of landscaping work. It cur- rently anticipates getting orders that would utilize 9,000 hours of equipment time from existing customers. Rainier charges $80 per hour for landscaping work. Cost information for the current expected activity level is as follows: ! 11-2 $720,000 450,000 Revenues ($80 X 9,000 hours) Variable landscaping costs (including materials and labor), which vary with the number of hours worked ($50 per hour × 9,000 hours) Fixed landscaping costs Variable marketing costs (5% of revenue) Fixed marketing costs Total costs 108,000 36,000 72,000 666,000 $ 54,000 Operating income Rainier has received an order for landscaping work fromn Victoria Corporation at S60 per hour that would require 2,000 hours of equipment time. Variable landscaping costs for the Victoria Corporation order are $50 per hour and variable marketing costs are 5% of revenues. Rainier can cither accept the Victoria offer in whole or reject it. Should Rainier accept the offer?
Transcribed Image Text:The Rainier Company provides landscaping services to corporations and businesses. All its landscaping work requires Rainier to use landscaping equipment. Its land- scaping equipment has the capacity to do 10,000 hours of landscaping work. It cur- rently anticipates getting orders that would utilize 9,000 hours of equipment time from existing customers. Rainier charges $80 per hour for landscaping work. Cost information for the current expected activity level is as follows: ! 11-2 $720,000 450,000 Revenues ($80 X 9,000 hours) Variable landscaping costs (including materials and labor), which vary with the number of hours worked ($50 per hour × 9,000 hours) Fixed landscaping costs Variable marketing costs (5% of revenue) Fixed marketing costs Total costs 108,000 36,000 72,000 666,000 $ 54,000 Operating income Rainier has received an order for landscaping work fromn Victoria Corporation at S60 per hour that would require 2,000 hours of equipment time. Variable landscaping costs for the Victoria Corporation order are $50 per hour and variable marketing costs are 5% of revenues. Rainier can cither accept the Victoria offer in whole or reject it. Should Rainier accept the offer?
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