StudyXY
RegisterLog in

Cost Analysis for Special Orders and Obsolete Inventory

A cost analysis focusing on special orders and obsolete inventory, examining financial implications for businesses.

Charlotte Young
Contributor
4.2
44
5 months ago
Preview (2 of 2 Pages)
100%
Purchase to unlock

Page 1

Cost Analysis for Special Orders and Obsolete Inventory - Page 1 preview image

Loading page image...

Cost Analysis for Special Orders and Obsolete InventoryQuestion #2 (15 points)Consider the following information, prepared based on a capacity of 60,000 units:CategoryCostper UnitVariable manufacturing costs$12.00Fixed manufacturingcosts$3.50Variable marketingcosts$4.00Fixed marketingcosts$2.50Capacity cannot be added and the firm currently sells the product for $25 per unit.Consider each of these scenarios independent of each other.a)The company is currently producing 45,000 units per month. A potential customer hascontacted the firm and offered to purchase 10,000 units this month only. Since thepotential customer approached the firm, there will be no variable marketing costsincurred. What is the minimum amount that the firm should be willing to accept for thisorder?We need to findthe minimum price the company should be willing to accept for this order of10,000 units.Information:•Variable manufacturing cost per unit= $12.00•Fixed manufacturing cost per unit= $3.50 (This is a fixed cost, so it is not relevant forthe special order, since it does not change with the volume of units produced.)•Variable marketing cost per unit= $4.00 (No variable marketing costs are incurred forthis order, so this cost is not relevant.)•Fixed marketing cost per unit= $2.50 (This is also a fixed cost, so it is not relevant forthe special order.)•Selling price per unit (current)= $25.00 (This is the price for regular sales, but we arelooking for the minimum price for the special order.)Relevant Costs for the Special Order:•Relevant cost for variable manufacturing= $12.00 per unit (since this cost will varydepending on the number of units produced)•No marketing costis relevant because the special customer won’t incur any variablemarketing costs.The minimum price the firm should be willing to accept for this order is the sum of the relevantcosts per unit.

Page 2

Cost Analysis for Special Orders and Obsolete Inventory - Page 2 preview image

Loading page image...

Study Now!

XY-Copilot AI
Unlimited Access
Secure Payment
Instant Access
24/7 Support
Document Chat

Document Details

Subject
Accounting

Related Documents

View all
Class Notes

Accounting

what really is accounting?

5.0
Class Notes

Master Managerial Accounting Techniques

Honors Managerial Accounting course led by Dr. Michael Newman, focusing on cost analysis, ethics, communication, and real-world application through interactive discussions, case studies, and presentations.

Class Notes

Controlling and Reporting of Real Assets

Overview of asset impairment recognition in accounting: when an asset’s value declines due to damage, market loss, or legal issues, a journal entry records the loss to reflect the asset’s reduced value. Key for reporting real assets like PPE.

Solved Assignments

Sarbanes Oxley Act, GAAP and IFRS

Overview of the Sarbanes-Oxley Act and its impact on GAAP and IFRS compliance.

Solved Assignments

Accounting Audit Final Exam MCQs 2015

Multiple-choice questions covering key auditing and accounting principles.

Solved Assignments

Team A Week 5 Problems

Problem-solving set from Week 5, covering various academic concepts.

Solved Assignments

IFRS or US GAAP Which is the Best Reporting Standard

A comparative analysis of IFRS and US GAAP reporting standards.

Solved Assignments

Understanding Key Concepts in Managerial Accounting

A solved assignment covering essential managerial accounting concepts, including cost analysis and financial decision-making.

Solved Assignments

Financial Reporting, Regulations, and Corporate Governance

Examination of financial reporting standards and their relationship to corporate governance frameworks

Solved Assignments

Midterm Exam on Governmental and Not-for-Profit Accounting

Midterm exam answers on governmental and non-profit accounting.