Chapter 7, Problem 7.5E

(a)

To determine

Special order:

A special order can be defined as a unique, one-time order made by a customer. A special order needs a variation for the manufacturing of all regular products. Such an order involves a huge amount of products and services at a particular price.

To prepare: The incremental analysis for the decision to make or buy the finals.

(b)

To determine

Special order:

A special order can be defined as a unique, one-time order made by a customer. A special order needs a variation for the manufacturing of all regular products. Such an order involves a huge amount of products and services at a particular price.

To determine: Whether P must buy the finials.

(c)

To determine

Incremental analysis:

Incremental analysis involves the accumulation of information that pertains to a single course of action or product line. Incremental analysis identifies the possible effects that can occur due to the decisions taken on the future earnings.

For instance, if somebody decides to purchase or lease a laptop for use in doing accounting homework, the cost of leasing and the cost of purchasing are considered. Leasing involves periodic lease payments while purchasing requires the down payment of the purchase price.

To prepare: The incremental analysis of the opportunity cost to make the finials is $20,000.