Question

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: Normal unit sales price: $49.95 Variable unit manufacturing costs: $10.50 Variable unit selling and administrative costs: $18.25 The customer is requesting that the sales order be accepted on the following terms: The unit sales price equals the unit contribution margin plus 10% Freight will be paid by the customer Your company will pay a $5,000 "facilitating payment "to a "friend of the customer" to get the product through customs more quickly. 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.

Answer 1

In surrounding the appropriate response, it is accepted that units are 1000 of the request.

In this manner complete commitment would be:

Sales = 49950

Variable Costs = 10500

Variable Selling Exp = 18250

Contribution = 21200

Since client is demanding to keep commitment at certain level, it wont be advantageous for the organization since organization wont gain same measure of $ 21200 as commitment in such circumstance when it needs to pay $ 5000 extra for the custom discharge despite the fact that selling costs would be eliminated and figures would be this way:

Sales = 23320

Variable Costs = 10500

Variable Selling Exp = 0

Contribution = 12820

Part 1: Accounting issues:

• This would present bookkeeping dilemma to report deals at not exactly the value charges to different clients
• There would be accounted for misfortune if request acknowledged

Moral issues:

• Different clients would feel off-base as we would be caring a lot more significant expense to them
• Representatives may likewise be snorted in light of the fact that additional time charges may not make up for the time went through with the family