Visburg Concrete Company pours concrete slabs for single-family dwellings. Lancing Construction Company, which operates outside Visburg’s normal sales territory, asks Visburg to pour 40 slabs for Lancing’s new development of homes. Visburg has the capacity to build 300 slabs and is presently working on 250 of them. Lancing is willing to pay only $3,300 per slab. Visburg estimates the cost of a typical job to include unit-level materials, $1,440; unit-level labor, $720; and an allocated portion of facility-level overhead, $1,200. Required : Calculate the contribution to profit from the special order. Should Visburg accept or reject the special order to pour 40 slabs for $3,300 each?

Visburg has the capacity to build 300 slabs and is presently working on 250 of them. Lancing is willing to pay only $3,300 per slab. Visburg estimates the cost of a typical job to include unit-level materials, $1,440; unit-level labor, $720; and an allocated portion of facility-level overhead, $1,200.

Unitary cost= 1440 + 720 + 1200= $3,360

Visburg shouldn't accept the special offer because it doesn't cover the variable costs. If you don't consider the facility-level overhead it is a good offer because it helps occupied the unused capacity.