When Evaluating A Special Order, Management Should

When Evaluating A Special Order Management Should?

When evaluating a special order management should: Only accept the order if the incremental revenue exceeds all product costs.

Which of the following are factors to consider when deciding whether to accept a special order?

When deciding whether to accept a special order management must consider several factors:
  • The capacity required to fulfill the special order.
  • Whether the price offered by the buyer will cover the cost of producing the products.
  • The role of fixed costs in the analysis.
  • Qualitative factors.

What is a special order decision?

Special-order decisions involve situations in which management must decide whether to accept unusual customer orders. These orders typically require special processing or involve a request for a low price.

What is a special order?

A Special Order transaction is typically performed when a customer wants to purchase an item that is not currently available in the store. The item may be out of stock or unavailable for any reason. A special order item may be any saleable item from the store’s inventory.

In what scenario would a special order be accepted?

The general rule is to accept a special order if the benefits exceed costs. Otherwise turn down respectfully. If the business has excess capacity to fill the special order it would accept if incremental sales revenue exceeds incremental variable costs.

When evaluating a make or buy decision managers should consider?

In a make-or-buy decision the most important factors to consider are part of quantitative analysis such as the associated costs of production and whether the business can produce at required levels.

When evaluating a special sales order decision the price offered must exceed the variable cost of filling the order that is the special order must have?

Terms in this set (29)

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in a special sales order decision the special price must exceed the variable cost of filling the order. in other words the special order must have: a postive contribution margin.

What criteria are relevant in evaluating a special offer or special order?

A special order can be filled only if you have excess capacity. You must have the ability to perform the work. Get ready for this: You can accept a lower sales price for a special order and still be profitable. The fixed costs have already been paid for with earlier production.

What reason would you give the manager as to why special order decisions should be made using variable costing?

Special order decisions should be made using variable costing because: Only variable costs will increase as a result of the special order.

Which of the following qualitative factors should be considered when evaluating a make or buy decision?

Examples of qualitative factors include the reputation and reliability of the suppliers the long-term outlook regarding production or purchasing the product and the possibility of changing or altering the decision in the future and the likelihood of changing or reversing the decision at a future date.

How do you solve special orders?

Multiply the number of units in the special order by the contribution margin per unit. If there are any incremental fixed costs subtract those costs from the contribution margin. If there are no incremental fixed costs the contribution margin is all profit.

What costs should be considered for a special order?

A special order is a one-time order that is not considered part of the company’s normal ongoing business. Only the incremental costs and benefits are relevant. Because the existing fixed manufacturing overhead costs would not be affected by the order they are not relevant.

Which of the following costs is irrelevant in the decision making of a special order when there is idle production capacity?

Sunk costs are irrelevant to decision making. Marketing costs will be an irrelevant cost in the decision making of a one-time-only special order. A sunk cost is a relevant cost in a decision making.

What are the qualitative factors in considering in accepting or rejecting a special order?

Qualitative factors that can influence a special order decision are the special order’s impact on sales to regular customers its potential to lead the company into new sales areas and the customer’s ability to maintain an ongoing relationship that includes good ordering and paying practices.

Which of the following costs are irrelevant for a special order that will allow an organization to utilize some of its present idle capacity quizlet?

Terms in this set (14) Which of the following costs are irrelevant for a special order that will allow an organization to utilize some of its present idle capacity? Unavoidable fixed overhead.

What is the financial advantage disadvantage of accepting the special order?

The financial advantage (disadvantage) of accepting a special order is calculated by deducting the incremental manufacturing and selling costs and expenses from the incremental revenue.

When a large company is considering a make or buy decision the focus should be?

variable cost per unit increases. O total fixed costs increase. O fixed cost per unit will decrease. When a large company is considering a “make or buy decision the focus should be: only on relevant revenues.

Which of the following is a way to evaluate supplier performance after the purchase goods or services have been delivered?

Evaluating supplier performance.

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After the purchased goods or services have been delivered a purchasing specialist is often responsible for reviewing the order and determining if the supplier followed through on its promises.

When workers underperform behavioral considerations suggest?

So when workers underperform for example behavioral considerations suggest that managers need to discuss ways to improve their performance with them rather than just sending them a report highlighting their underperformance. 1) Which of the following is true of line management?

How do you find the opportunity cost of a special order?

The opportunity cost can be measured as the contribution margin that would be lost on sales made through regular channels. For example if a unit of product sold through normal channels at $9 and variable costs were $5 then the contribution margin would be $4.

What data are relevant in deciding whether to accept an order at a special price?

The relevant information in accepting an order at a special price is the difference between the variable manufacturing costs to produce the special order and expected revenues. Any changes in fixed costs opportunity cost or other incremental costs or savings (such as additional shipping) should be considered.

What are the three core measures used in throughput accounting?

There are three main ratios that are calculated: (1) return per factory hour (2) cost per factory hour and (3) the throughput accounting ratio. 1. Return per factory hour = Throughput per unit / product time on bottleneck resource.

When we receive a one time special order what should be the process we use to determine whether we can accept it or reject it?

Managers often use differential analysis to decide whether to accept a special one-time order made by a customer. Managers compare sales revenue and costs for each alternative (accept or reject the special order) and select the alternative with the highest profit.

Which of the following costs are irrelevant for a special order that will allow an organization?

Which of the following costs are irrelevant for a special order that will allow an organization to utilize some of its present idle capacity? Unavoidable fixed overhead. Which of the following costs are not considered in a differential analysis for a make-or-buy decision?

When deciding whether to accept a special order we should compare the?

When deciding whether to accept a special order we should compare the extra revenues we will receive against the extra costs we will incur to fill the order. Costs that we will incur whether or not we fill the order are irrelevant to our decision.

In which steps of the management decision making process does accounting?

In which steps of the management decision-making process does accounting make its primary contribution? Identifying the problem and making a decision. Evaluating possible courses of action and reviewing the results of the decision.

How you would use variable costing in managerial decisions?

Managers use variable costing to determine which products to offer and which products to discontinue. Rather than discontinuing a product based on negligible profits a manager can use variable costing to determine the overall costs of keeping a unit in production.

Which of the following is irrelevant to the special order decision?

A company is considering a special order for 1 000 units to be priced at $8.90 (the normal price would be $11.50). The order would require specialized materials costing $4.00 per unit. Direct labor and variable factory overhead would cost $2.15 per unit. Fixed factory overhead is $1.20 per unit.

What is relevant in make or buy decision?

Qualitative Analysis

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Several factors influence make-or-buy decisions. Quality.

What is the purpose of make buy decision?

The make or buy decision involves whether to manufacture a product in-house or to purchase it from a third party. The outcome of this analysis should be a decision that maximizes the long-term financial outcome for a company.

When should a special order be accepted?

The general rule is to accept a special order if the benefits exceed costs. Otherwise turn down respectfully. If the business has excess capacity to fill the special order it would accept if incremental sales revenue exceeds incremental variable costs.

What is special order?

Definition of special order

: a routine order issued by an authorized military headquarters that includes matter concerning individuals but is not of general interest — compare general order.

What are special order decisions?

Special-order decisions involve situations in which management must decide whether to accept unusual customer orders. These orders typically require special processing or involve a request for a low price.

What criteria are relevant in evaluating a special offer or special order?

A special order can be filled only if you have excess capacity. You must have the ability to perform the work. Get ready for this: You can accept a lower sales price for a special order and still be profitable. The fixed costs have already been paid for with earlier production.

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