Preston concrete is a major supplier of concrete to

Assignment Help Managerial Accounting

Reference no: EM13378460

Preston Concrete is a major supplier of concrete to residential and commercial builders in the Pacific Northwest. The company's policy is price deliveries at 25 percent over full cost per cubic yard (including an allowance for administrative costs). At the start of 2014, the company estimated costs as follows:

Material costs = $75 per cubic yard

Delivery costs = $500,000 per year + $10 (mile) + $50 (truck hour)

Yard operation costs = $300,000 per year + $17 per cubic yard

Administrative costs = $2,000,000 per year

Delivery costs include a rate per mile, recognizing that more miles result in more gas and maintenance costs, and a rate per truck hour since, even if a delivery truck is kept waiting at a job site, the truck must be kept running (so, the concrete mix will not solidify) and the driver must be paid. At the start of 2014, the company estimated that it would deliver 500,000 cubic yards.

Required:

a.) On October 28, Fairview Construction Company asked Preston Concrete to deliver 6,000 cubic yards of concrete. The job will require driving 8,400 miles and 300 truck hours. What will the price be if Preston follows its normal pricing policy?

b.) A sharp increase in interest rates has reduced housing starts and the demand for concrete. Fairview has indicated that it will sign a firm order agreement only if the price is $115 per cubic yard. Should Preston accept the order? Briefly, indicate factors that, while hard to quantify, should be taken into account in this decision.

Reference no: EM13378460

Questions Cloud

The scq corporation manufactures specialty medical tools : the scq corporation manufactures specialty medical tools ranging from 10000 to15000 per unit. the tools are used in

During 2012 the following events took place for a small : during 2012 the following events took place for a small distribution company. you are required to prepare the

As the management accountant at ajack partnership you are : as the management accountant at ajack partnership you are involved in the planning and control of financial statements

Ajack partnership manufactures jackhammers ajack : ajack partnership manufactures jackhammers. ajack partnership is looking for guidance in the variances of its standard

Preston concrete is a major supplier of concrete to : preston concrete is a major supplier of concrete to residential and commercial builders in the pacific northwest.nbsp

Five star tools is a small family-owned firm that : five star tools is a small family-owned firm that manufactures diamond-coated cutting tools chisels and saws used by

Don lieberman and associates a cpa firm uses job order : don lieberman and associates a cpa firm uses job order costing to capture the costs of its audit jobs. there were no

Good earth products produces orange juice and candied : good earth products produces orange juice and candied orange peels. a 1000 pound batch of oranges costing 500 is

Larkspur corp manufactures bird feeders it currently has : larkspur corp. manufactures bird feeders. it currently has two product lines the standard and the deluxe. larkspur has

User Account

All Pages