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 is currently utilizing 9,000 hours of equipment time. Rainier charges $80 per hour for landscaping work. Cost information for the current activity level is as follows: Revenues ($80 * 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 revenues) Fixed marketing costs Total costs Operating income $720,000 450,000 108,000 36,000 72,000 666,000 $ 54,000 Rainier has just received a one-time only special order for landscaping work from Lasell Corporation at $60 per hour that would require 1,000 hours of equipment time. Should Rainier accept the offer even though revenue per hour is less than Rainier’s landscaping cost of $62 per hour [($450,000 + $108,000) , 9,000 hours)]? No marketing costs will be necessary for the one-time only special order.
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 is currently utilizing 9,000 hours of equipment time. Rainier charges $80 per hour for landscaping work. Cost information for the current activity level is as follows: Revenues ($80 * 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 revenues) Fixed marketing costs Total costs Operating income $720,000 450,000 108,000 36,000 72,000 666,000 $ 54,000 Rainier has just received a one-time only special order for landscaping work from Lasell Corporation at $60 per hour that would require 1,000 hours of equipment time. Should Rainier accept the offer even though revenue per hour is less than Rainier’s landscaping cost of $62 per hour [($450,000 + $108,000) , 9,000 hours)]? No marketing costs will be necessary for the one-time only special order.
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. 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 is
currently utilizing 9,000 hours of equipment time. Rainier charges $80 per hour for landscaping work. Cost information for the current activity level is as follows:
Revenues ($80 * 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 revenues)
Fixed marketing costs
Total costs Operating income
$720,000 450,000
108,000 36,000 72,000
666,000
$ 54,000
Rainier has just received a one-time only special order for landscaping work from Lasell Corporation at $60 per hour that would require 1,000 hours of equipment time. Should Rainier accept the offer even though revenue per hour is less than Rainier’s landscaping cost of $62 per hour [($450,000 + $108,000) , 9,000 hours)]? No marketing costs will be necessary for the one-time only special order.
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