AFM102March72011

AFM102March72011 - Introduction to Management Accounting...

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Click to edit Master subtitle style 5/11/11 © Anthony Atkinson Introduction to Management Accounting March 7, 2011 Special Order Problem 11
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5/11/11 © Anthony Atkinson 22
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5/11/11 © Anthony Atkinson Key Concepts in Today’s Class Determining a price for a one time special order 33
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5/11/11 © Anthony Atkinson Special Offer Characteristics One time only No effects on other business No implications for future business with this or other customers These two criteria seldom met in practice 44
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5/11/11 © Anthony Atkinson Steps Is there sufficient idle capacity to meet this order? If so there are no opportunity costs associated with this order If not compute the opportunity cost associated with this order Identify the special order price that covers incremental (variable) costs and opportunity costs 55
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5/11/11 © Anthony Atkinson 6-17 66
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5/11/11 © Anthony Atkinson 77 6-17 Healthy Hearth has sufficient excess capacity to handle the one-time order for 1000 meals next month. Consequently, the analysis focuses on incremental revenues and costs: Incremental revenue per meal $3.50 Incremental cost per meal 3.00 Incremental contribution margin per meal $0.50 Number of meals × 1,000 Increase in operating income $ 500
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5/11/11 © Anthony Atkinson 6-18 88
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This note was uploaded on 05/11/2011 for the course AFM 102 taught by Professor R.ducharme during the Spring '09 term at Waterloo.

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AFM102March72011 - Introduction to Management Accounting...

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