Question: Overbey Construction Company is a building contractor specializing in small commercial buildings. The company has the opportunity to accept one of two jobs; it cannot accept both because they must be performed at the same time and Overbey does not have the necessary labor force for both jobs. Indeed, it will be necessary to hire a new supervisor if either job is accepted. Furthermore, additional insurance will be required if either job is accepted. The revenue in cost associated with each job follow.
| COST |
|
|
JOB A |
JOB B |
| Contract price |
|
|
$730,000 |
$650,000 |
| Unit-level materials |
|
|
243,700 |
223,450 |
| Unit-level labor |
|
|
249,150 |
253,750 |
| Unit-level overhead |
|
|
18,000 |
12,600 |
| Supervisor's salary |
|
|
116,670 |
116,670 |
| Rental equipment costs |
|
|
24,900 |
27,300 |
| Depreciation on tools (zero market value) |
|
|
19,900 |
19,900 |
| Allocated portion of companywide facility-sustaining costs |
|
|
10,400 |
8,600 |
| Insurance cost for job |
|
|
18,200 |
18,200 |
Please help with the required items.
Required to do:
Q1. Assume that Overbey has decided to accept one of the two jobs. Identify the information relevant to selecting one job versus the other. Recommend which job to accept and support your answer with appropriate computations.
Q2. Assume that job A is no longer available. Overbey's choice is to accept or reject job B alone. Identify the information relevant to this decision. Recommend whether to accept or reject job B. Support your answer with appropriate computations.