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Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402 Exercise 41
Special-Order Decision, Services, Qualitative Aspects
Jason Rogers works full-time for UPS and runs a lawn-mowing service part-time after work during the warm months of April through October. Jason has three men working with him, each of whom is paid $6 per lawn mowing. Jason has 30 residential customers who contract with him for once-weekly lawn mowing during the months of May through September, and twice-per- month mowings during April and October. On average, Jason charges $40 per lawn mowed. Recently, LStar Property Management Services asked Jason to mow the lawn at each of its 20 rental houses every two weeks during the months of May through September. LStar has offered to pay $20 per lawn mowing, and would forego the lawn edging that normally takes Jason's team about half of its regular mowing time. If Jason accepts the job, he can assign a two-man team to mow the rental house yards, and will have to buy an additional power lawn mower for about $350 used. Fuel to run the additional mower will be about $0.50 per yard.
Required:
1. If Jason accepts the special order, by how much will his income increase or decrease?
2. What are some of the qualitative reasons why Jason might want to accept or decline the special order?
Jason Rogers works full-time for UPS and runs a lawn-mowing service part-time after work during the warm months of April through October. Jason has three men working with him, each of whom is paid $6 per lawn mowing. Jason has 30 residential customers who contract with him for once-weekly lawn mowing during the months of May through September, and twice-per- month mowings during April and October. On average, Jason charges $40 per lawn mowed. Recently, LStar Property Management Services asked Jason to mow the lawn at each of its 20 rental houses every two weeks during the months of May through September. LStar has offered to pay $20 per lawn mowing, and would forego the lawn edging that normally takes Jason's team about half of its regular mowing time. If Jason accepts the job, he can assign a two-man team to mow the rental house yards, and will have to buy an additional power lawn mower for about $350 used. Fuel to run the additional mower will be about $0.50 per yard.
Required:
1. If Jason accepts the special order, by how much will his income increase or decrease?
2. What are some of the qualitative reasons why Jason might want to accept or decline the special order?
Explanation
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1)Identify the increased or decreased in...
Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
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