Special Order Total cost data follow for Glendale Manufacturing Company, which has a normal capacity per period of 8.000 units of prouuct that sel for $60 each. For the foreseeable future, regular sales volume should continue to equal normal capacity. Direct material 598.400 Direct labor 60,000 Variable manufacturing overhead Foxed manufacturing overhead Note 1) 44400 38.400 Selling expense (Note 2) Administrative expense (fred) 35.200 15.000 %24291,400 Notes: 1. Beyond normal capacity, fixed overhead costs increase $1,800 for each 500 units or fraction thereof until a maximum capacity of 10,000 units is reached. 2. Selling expenses consist of a 6% sales commission and shipping costs of 80 cents per unit. Glendale pays only three-fourths of the regular sales commission on sales totaling 501 to 1,000 units and only two-thirds the regular commission on sales totaling 1,000 units or more. Glendale's sales manager has received a special order for 1,200 units from a large discount chain at a price of $36 each, FO.B. factory. The controller's office has furnished the following additional cost data related to the special order: 1. Changes in the product's design will reduce direct material costs $1.50 per unit. 2. Special processing will add 20% to the per-unit direct labor costs. 3. Variable overhead will continue at the same proportion of direct labor costs. 4. Other costs should not be affected. a. Present an analysis supporting a decision to accept or reject the special order. (Round computations to the nearest cent.) Differential Analysis Per Unit Total Differential revenue Differential costs Direct material Direct labor Varable manufacturing overhead Selling Commission Shipping (FO.B. factory terms) Total variable cost Contribution margin from special order Foxed cost increment Extra cost Proft on special order
Special Order Total cost data follow for Glendale Manufacturing Company, which has a normal capacity per period of 8.000 units of prouuct that sel for $60 each. For the foreseeable future, regular sales volume should continue to equal normal capacity. Direct material 598.400 Direct labor 60,000 Variable manufacturing overhead Foxed manufacturing overhead Note 1) 44400 38.400 Selling expense (Note 2) Administrative expense (fred) 35.200 15.000 %24291,400 Notes: 1. Beyond normal capacity, fixed overhead costs increase $1,800 for each 500 units or fraction thereof until a maximum capacity of 10,000 units is reached. 2. Selling expenses consist of a 6% sales commission and shipping costs of 80 cents per unit. Glendale pays only three-fourths of the regular sales commission on sales totaling 501 to 1,000 units and only two-thirds the regular commission on sales totaling 1,000 units or more. Glendale's sales manager has received a special order for 1,200 units from a large discount chain at a price of $36 each, FO.B. factory. The controller's office has furnished the following additional cost data related to the special order: 1. Changes in the product's design will reduce direct material costs $1.50 per unit. 2. Special processing will add 20% to the per-unit direct labor costs. 3. Variable overhead will continue at the same proportion of direct labor costs. 4. Other costs should not be affected. a. Present an analysis supporting a decision to accept or reject the special order. (Round computations to the nearest cent.) Differential Analysis Per Unit Total Differential revenue Differential costs Direct material Direct labor Varable manufacturing overhead Selling Commission Shipping (FO.B. factory terms) Total variable cost Contribution margin from special order Foxed cost increment Extra cost Proft on special order
Managerial Accounting: The Cornerstone of Business Decision-Making
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Chapter3: Cost Behavior And Cost Forecasting
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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.
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Special Order
Total cost data follow for Glendale Manufacturing Company, which has a normal capacity per period of 8,000 units of prouuct that sell for $60 each. For the foreseeable future, regular sales volume should continue to equal normal capacity.
Direct material
$98,400
Direct labor
60,000
Variable manufacturing overhead
44,400
Fixed manufacturing overhead (Note 1)
38,400
Selling expense (Note 2)
35,200
Administrative expense (fixed)
15,000
$291,400
Notes:
1. Beyond normal capacity, fixed overhead costs increase $1,800 for each 500 units or fraction thereof until a maximum capacity of 10,000 units is reached.
2. Selling expenses consist of a 6% sales commission and shipping costs of 80 cents per unit. Glendale pays only three-fourths of the regular sales commission on sales totaling 501 to 1,000 units and only two-thirds the regular commission on sales totaling 1,000
units or more.
Glendale's sales manager has received a special order for 1,200 units from a large discount chain at a price of $36 each, F.O.B. factory. The controller's office has furnished the following additional cost data related to the special order:
1. Changes in the product's design will reduce direct material costs $1.50 per unit.
2. Special processing will add 20% to the per-unit direct labor costs.
3. Variable overhead will continue at the same proportion of direct labor costs.
4. Other costs should not be affected.
a. Present an analysis supporting a decision to accept or reject the special order. (Round computations to the nearest cent.)
Differential Analysis
Per Unit
Total
Differential revenue
0.
Differential costs
Direct material
Direct labor
Variable manufacturing overhead
Selling:
Commission
Shipping (F.O.B. factory terms)
Total variable cost
24
Contribution margin from special order
Fixed cost increment:
Extra cost
0.
Profit on special order
b. What is the lowest price Glendale could receive and still make a profit of $3,600 before income taxes on the special order?
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