Question

Finch Concrete Company pours concrete slabs for single-family dwellings. Lancing Construction Company, which operates outside Finch’s normal sales territory, asks Finch to pour 50 slabs for Lancing’s new development of homes. Finch has the capacity to build 470 slabs and is presently working on 160 of them. Lancing is willing to pay only $2,580 per slab. Finch estimates the cost of a typical job to include unit-level materials, $970; unit-level labor, $440; and an allocated portion of facility-level overhead, $1,260. Required Calculate the contribution to profit from the special order. Should Finch accept or reject the special order to pour 50 slabs for $2,580 each?

Answer 1

Explanation:

Given that

Finch to pour = 50 slab

Willing to pay amount = $2,580

Unit-level material = $970

Unit-level labor = $440

The computation of given question is below:-

Contribution to profit from the special order = Sales revenue - Material cost - Labor cost

= (50 × $2,580) - (50 × $970) - (50 × $440)

= $129,000 - $48,500 -$22,000

= $129,000 - $70,500

= $58,500

Therefore, we conclude that special order should be accepted.