Chapman 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 Chapman 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 and costs associated with each job follow.

Required
a. Assume that Chapman 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.
b. Assume that Job A is no longer available. Chapman'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.

Transcribed Image Text:

Cost Category Contract price Unit-level materials Unit-level labor Unit-level overhead Supervisor's salary Rental equipment costs Depreciation on tools (zero market value) Allocated portion of companywide facility-sustaining costs Insurance cost for job Job A Job B $800,000 243,700 249,150 18,000 116,670 24,900 19,900 10,400 18,200 $700,000 223,450 305,000 116,670 27,300 19,900 8,600 18,200