微信扫一扫
实时资讯全掌握
| Green Corporation builds custom-designed machinery. A review of selected data and the company's pricing policies revealed the following. A 10% commission is paid on all sales orders. Variable and fixed factory overheads total 40% and 20%, respectively, of direct labor. Corporate administrative costs amount to 10% of direct labor. When bidding on jobs, Green adds a 25% markup to the total of all factory and administrative costs to cover income taxes and produce a profit. The firm's income tax rate is 40%. The company expects to operate at a maximum of 80% of practical capacity. Green recently received an invitation to bid on the manufacture of some custom machinery for Kennendale, Inc. For this project, Green's production accountants estimate the material and labor costs will be $66,000 and $120,000, respectively. Accordingly, Green submitted a bid to Kennendale in the amount of $375,000. Feeling Green's bid was too high, Kennendale countered with a price of $280,000. Which one of the following options should be recommended to Green's management? A. Accept the counteroffer because the order will increase operating income. B. Reject the counteroffer even though the order will increase operating income. C. Reject the counteroffer because the order will decrease operating income. D. Accept the counteroffer even though the order will decrease operating income. |