Read the scenario below, and address the subsequent requirements.
You are analyzing cost data for your boss related to a special order your company is considering from a large customer in Singapore. The following data are applicable to the product being ordered:
The customer is requesting that the sales order be accepted on the following terms:
Your boss has told you this is a very important customer. Furthermore, this order will help some employees earn a little extra holiday money with overtime.
Required:
Post your responses to the following questions:
Please help ASAP!
In framing the answer, it is assumed that units are 1000 of the order.
Thus total contribution would be:
Sales | 49950 |
Variable Costs | 10500 |
Variable Selling Exp | 18250 |
Contribution | 21200 |
Since customer is insisting to keep contribution at certain level, it wont be beneficial for the company because company wont earn same amount of $ 21200 as contribution in such situation when it has to pay $ 5000 extra for the custom release even though selling expenses would be elemenated and figures would be like this:
Sales | 23320 |
Variable Costs | 10500 |
Variable Selling Exp | 0 |
Contribution | 12820 |
Part 1
Accounting issues:
Ethical issues:
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