Question

Packer Concrete Company pours concrete slabs for single-family dwellings. Wolff Construction Company, which operates outside Packer’s normal sales territory, asks Packer to pour 40 slabs for Wolff’s new development of homes. Packer has the capacity to build 300 slabs and is presently working on 250 of them. Wolff is willing to pay only $2,750 per slab. Packer estimates the cost of a typical job to include unit-level materials, $1,200; unit-level labor, $600; and an allocated portion of facility-level overhead, $1,000.

Required:
a. Calculate the contribution to profit from the special order.

Answer 1

Answer:

The contribution to profit from the special order us $38,000.

Step-by-step explanation:

Consider the provided information.

We need to calculate the contribution on to profit from the special order.

Wolff Construction Company, which operates outside Packer’s normal sales territory, asks Packer to pour 40 slabs for Wolff’s new development of homes. Packer has the capacity to build 300 slabs and is presently working on 250 of them. Wolff is willing to pay only $2,750 per slab.

Sale = 40 × $2,750 = $110,000

To find the profit subtract the materials and labor cost from sale amount.

     Particulars                                              Amount

Sale (40 × $2,750)                                     $110,000

Less: Variable expense

Unit level materials (40× $1,200)              $48,000

Unit level labor(40× $600)                        $24,000

Contribution margin                                   $38,000

The overhead cost will not be considered while determine the contribution to profit from accepting the order of 40 slab.

Hence, the contribution to profit from the special order us $38,000.