Camino Company manufactures designer to-go coffee cups. Each line of coffee cups is endorsed by a high-profile celebrity and designed with special elements selected by the celebrity. During the most recent year, Camino Company had the following operating results while operating at 85 percent (119,000 units) of its capacity: Sales revenue $ 1,904,000 Cost of goods sold 728,875 Gross profit $ 1,175,125 Operating expenses 59,500 Net operating income $ 1,115,625 Camino’s cost of goods sold and operating expenses are 80 percent variable and 20 percent fixed. Camino has received an offer from a professional wrestling association to design a coffee cup endorsed by its biggest star and produce 18,000 cups for $10 each (total $180,000). These cups would be sold at wrestling matches throughout the United States. Acceptance of the order would require a $54,000 endorsement fee to the wrestling star, but no other increases in fixed operating expenses. Required: Complete the incremental analysis of the special order in the table provided below. Should Camino accept this special order? If Camino were operating at full capacity, what price would Camino require for the special order?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Camino Company manufactures designer to-go coffee cups. Each line of coffee cups is endorsed by a high-profile celebrity and designed with special elements selected by the celebrity. During the most recent year, Camino Company had the following operating results while operating at 85 percent (119,000 units) of its capacity:
| Sales revenue | $ 1,904,000 |
|---|---|
| Cost of goods sold | 728,875 |
| Gross profit | $ 1,175,125 |
| Operating expenses | 59,500 |
| Net operating income | $ 1,115,625 |
Camino’s cost of goods sold and operating expenses are 80 percent variable and 20 percent fixed. Camino has received an offer from a professional wrestling association to design a coffee cup endorsed by its biggest star and produce 18,000 cups for $10 each (total $180,000). These cups would be sold at wrestling matches throughout the United States. Acceptance of the order would require a $54,000 endorsement fee to the wrestling star, but no other increases in fixed operating expenses.
Required:
- Complete the incremental analysis of the special order in the table provided below.
- Should Camino accept this special order?
- If Camino were operating at full capacity, what price would Camino require for the special order?
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