**ADM 2341– Summer 2020**

**Assignment 9 – Relevant Costing**

Your assignment submission must be typed up in either Word or Excel and uploaded (one file only) to the Brightspace assignment drop-box before midnight Friday July 24.

**QUESTION 1**

**McTavish Transportation loads Intermodal containers onto railcars. Each railcar can accommodate a maximum size load of 60 feet long x 8 feet wide x 8 feet high. McTavish only loads three sized of intermodal containers:**

| Short | Standard | Long |

Container size (L x W x H) (in feet) | 10 x 8 x 8 | 20 x 8 x 8 | 60 x 8 x 8 |

Price charged to customer: | $ 520 | $ 900 | $ 2,100 |

Variable cost per container | 280 | 300 | 400 |

McTavish currently has space available on 10,000 railcars. No additional railcars are available.

Fixed costs related to loading the railcars is $80,000. This is allocated at $8 per foot of length. (For example, a Short container would be allocated $80 in fixed costs)

Various customers have the following containers to be loaded. Total demand is as follows:

Short: 36,000 containers

Standard: 18,000 containers

Long: 3,000 containers

McTavish can pick and choose which containers are loaded and which customers to accept.

**Required**

**How many rail cars would be required to satisfy all of the current demand?**

**How many of each container type should McTavish load?**

**Question 2**

Pembroke Furniture manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $80 per table, consisting of 70% variable costs and 30% fixed costs, based on a current production level of 15,000. Total capacity is 16,000. The current selling price is $100 per unit.

The company just received a special order for 2,000 tables. This special order will be delivered to the customer as a single delivery, and will require extra shipping and storage costs of $50,000. As well, packaging costs will be reduced by $6/unit for the special order**.**

**Required**

**What is the minimum selling price they should accept for this special order?**

**Besides costs, briefly describe what other considerations should be included in accepting or rejecting this special order.**