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Unformatted text preview: customer resistance.
Examples include frustrations with call centers and tech support lines where language barriers
become apparent, and customer protest/rejection because of perceived unfair labor practices in
certain global regions. Despite the potential problems, there are decided trends suggesting that the
most successful businesses learn to utilize logical outsourcing opportunities in both local and global
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Discover the truth at www.deloitte.ca/careers © Deloitte & Touche LLP and affiliated entities. © Deloitte & Touche LLP and affiliated entities. D Business Decision Logic Analytics for Managerial Decision Making 2.6 Special Orders
A business may receive a special order at a price that is significantly different from the normal
pricing scheme. The quantitative analysis will focus on the contribution margin associated with the
special order. In other words, it must be determined whether the special order sales price exceeds
the variable production and selling costs associated with the special order.
To illustrate, assume that Lunker Lures Company produces the popular Rippin’ Rogue pictured at
right. The “cost” to produce a Rippin’ Rogue is $1.10, consisting of $0.20 direct materials, $0.40
direct labor, and $0.50 factory overhead. The overhead is 30% variable and 70% fixed cost
allocation. Lunker Lures are sold to retailers across the country through an established network of
manufacturers’ representatives who are paid $0.10 for each lure sold in their respective territories.
Lunker Lures has been approached by Walleye Pro Fishing World to produce a special run of
1,000,000 units. These lures would be sold under the Walleye Wiggler brand name and would not...
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