cost acct case4 - the special order, he will be going over...

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Medhanie Mesfin Cost Accounting 3270 Case IV Fine Print Company 1. I suggest for Johnson at the rule of thumb that if the variable cost is less than selling price then you can go ahead with the production. In this case, the revenue from producing the special order is $2500 and the variable cost is $2000. Johnson’s profit here is $500 if he decides to take the order. But if he decides to give the special order to Bradley, he will be making the same profit; 25000*10/100= $500. 2. Johnson should do about the special order for the brochures that based on the variable cost; Johnson will be making profit by producing the special order. But if Johnson takes
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Unformatted text preview: the special order, he will be going over his full capacity of 150,000. Johnson’s unit cost of producing the special order is $8.00; 2000/25000, this is exactly what Ernest Bradley wants to charge him for doing the same job. Johnson should be considering outsourcing because he does not have any more capacity to take an additional order. Johnson’s profit from insourcing will be the same from outsourcing the special order. Medhanie Mesfin Accounting 3270 Case IV Fine Print Company May 04, 2010...
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This note was uploaded on 02/16/2011 for the course BUSI 3830 taught by Professor James during the Spring '11 term at University of North Texas Health Science Center.

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cost acct case4 - the special order, he will be going over...

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