INTRODUCTION TO Management Accounting Horngren Sundem Burgst

INTRODUCTION TO Management Accounting Horngren Sundem Burgstahler Schatzberg

Solution

Solution 1:

Therefore operating income will increase by $300 on accepting special order by BAS.

Solution 2:

If i was manager of BAS, then i will deifinitely accept the special order as it will result in increase in operating income by $300.

Other than quantitative factors, following qualitative factors must be considered while taking decision to accept special order.

1. Accepting special order at price lesser than regular market price may result in dissatisfaction among regular customer and they will demand price decrease in products.

2. Accepting special order will add new customer base in BAS and if it accept the special order at special price then BAS will get more business in future from this customer.

Computation of income from special order - Belltown Atheletic Supply
Particulars	Amount
Revenue from special order (100*$15)	$1,500.00
Relevant cost:
Purchase cost of jersey (100*$10)	$1,000.00
Variable printing cost (100*$2)	$200.00
Income from special order	$300.00