Special-Order Decision, Traditional Analysis, Qualitative Aspects Feinan Sports, Inc., manufactures sporting equipment, including weight-lifting gloves. A national sporting goods chain recently submitted a special order for 4,500 pairs of weight-lifting gloves. Feinan Sports was not operating at capacity and could use the extra business. Unfortunately, the order’s offering price of $12.70 per pair was below the cost to produce them. The controller was opposed to taking a loss on the deal. However, the personnel manager argued in favor of accepting the order even though a loss would be incurred; it would avoid the problem of layoffs and would help maintain the community image of the company. The full cost to produce a pair of weight-lifting gloves is presented below. Direct materials $7.40 Direct labor 3.80 Variable overhead 1.60 Fixed overhead 3.10 Total $15.90 No variable selling or administrative expenses would be associated with the order. Non-unit-level activity costs are a small percentage of total costs and are therefore not considered. 1. Assume that the company would accept the order only if it increased total profits. Should the company accept or reject the order?Reject Provide supporting computations. If required, round your answers to the nearest cent. Enter a loss as a negative amount. Incremental revenue per pair $ Incremental cost per pair Incremental gain (loss) per pair $ Total decrease in income: $ 2. Suppose that Feinan Sports has negotiated with the potential customer, and has determined that it can substitute cheaper materials, reducing direct materials cost by $0.80 per unit. In addition, the company’s engineers have found a way to reduce direct labor cost by $0.40 per unit. Should the company accept or reject the order?Accept Provide supporting computations. If required, round your answers to the nearest cent. Enter a loss as a negative amount. Incremental revenue per pair $ Incremental cost per pair Incremental gain (loss) per pair $ Total increase in income: $
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.
Special-Order Decision, Traditional Analysis, Qualitative Aspects
Feinan Sports, Inc., manufactures sporting equipment, including weight-lifting gloves. A national sporting goods chain recently submitted a special order for 4,500 pairs of weight-lifting gloves. Feinan Sports was not operating at capacity and could use the extra business. Unfortunately, the order’s offering price of $12.70 per pair was below the cost to produce them. The controller was opposed to taking a loss on the deal. However, the personnel manager argued in favor of accepting the order even though a loss would be incurred; it would avoid the problem of layoffs and would help maintain the community image of the company. The full cost to produce a pair of weight-lifting gloves is presented below.
| Direct materials | $7.40 |
| Direct labor | 3.80 |
| Variable overhead | 1.60 |
| Fixed overhead | 3.10 |
| Total | $15.90 |
No variable selling or administrative expenses would be associated with the order. Non-unit-level activity costs are a small percentage of total costs and are therefore not considered.
1. Assume that the company would accept the order only if it increased total profits. Should the company accept or reject the order?
Reject
Provide supporting computations. If required, round your answers to the nearest cent. Enter a loss as a negative amount.
| Incremental revenue per pair | $ |
| Incremental cost per pair | |
| Incremental gain (loss) per pair | $ |
Total decrease in income: $
2. Suppose that Feinan Sports has negotiated with the potential customer, and has determined that it can substitute cheaper materials, reducing direct materials cost by $0.80 per unit. In addition, the company’s engineers have found a way to reduce direct labor cost by $0.40 per unit. Should the company accept or reject the order?
Accept
Provide supporting computations. If required, round your answers to the nearest cent. Enter a loss as a negative amount.
| Incremental revenue per pair | $ |
| Incremental cost per pair | |
| Incremental gain (loss) per pair | $ |
Total increase in income: $
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