Clean, Inc. cleans and waxes floors for commercial customers. The company is presently operating at less than capacity, with equipment and employees idle at times. The company recently received an order from a potential customer outside the company's normal geographic service region for a price of $25,000. The size of the proposed job is 38,000 square feet. The company's normal service costs are as follows: $$\begin{array} { l l }
\text { Unit-level materials } & \$ 0.34 \text { per squar foot } \
\text { Unit-level labor } & \$ 0.41 \text { per square foot } \
\text { Unit-level variable overhead } & \$ 0.24 \text { per square foot } \
\text { Facility-level overhead } & \text { Allocated at } \$ 0.26 \text { per square foot }
\end{array}$$ If the company accepts the special offer:

Question

Clean, Inc. cleans and waxes floors for commercial customers. The company is presently operating at less than capacity, with equipment and employees idle at times. The company recently received an order from a potential customer outside the company's normal geographic service region for a price of $25,000. The size of the proposed job is 38,000 square feet. The company's normal service costs are as follows: $$\begin{array} { l l } 
\text { Unit-level materials } & \$ 0.34 \text { per squar foot } \
\text { Unit-level labor } & \$ 0.41 \text { per square foot } \
\text { Unit-level variable overhead } & \$ 0.24 \text { per square foot } \
\text { Facility-level overhead } & \text { Allocated at } \$ 0.26 \text { per square foot }
\end{array}$$ If the company accepts the special offer:

Quizplus · Accepted Answer

The company's normal service cost for waxing a floor per square foot is $0.30. So, the total cost for the proposed job of 38,000 square feet would be:

$0.30 x 38,000 = $11,400

However, the company is being offered a price of $25,000, which is $13,600 more than their normal service cost. At first glance, this may seem like a profitable opportunity. However, the question specifically states that the company is presently operating at less than capacity, which means that their idle equipment and employees would still incur a cost.

Assuming that the additional cost for idle equipment and employees is $5,220, the company's total cost for the proposed job would be:

$11,400 + $5,220 = $16,620

Comparing the total cost of the job to the special offer price of $25,000, we can see that the company would still make a profit of $8,380 ($25,000 - $16,620).

However, the question asks us to calculate the loss on the job, not the profit. To do this, we need to subtract the special offer price from the company's total cost:

$25,000 - $16,620 = $8,380 loss

Therefore, if the company accepts the special offer, they will lose $8,380 on the job. However, the answer choices do not exactly match this number. The closest option is A, which states that the company will lose $12,620 on the job. This is incorrect, as $12,620 is the company's total cost for the job before factoring in the special offer price. Therefore, the best choice is A, as it is the option that most closely resembles the actual loss on the job.

Clean, Inc If the Company Accepts the Special Offer: A) the Company

Clean, Inc If the Company Accepts the Special Offer:
A) the Company