From this flight the airline is not currently

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Unformatted text preview: this flight. • The airline is not currently planning to add • The airline is not currently planning to add any new routes and has two planes that are any iidle and could be used to meet the needs of dle and could be used to meet the needs of the agency. the agency. • The next screen shows cost data developed • The next screen shows cost data developed by managerial accountants at Worldwide. by managerial 14-14 Accept or Reject a Special Order Accept Worldwide will save about $5,000 in reservation and ticketing costs if the charter is accepted. 14-15 Accept or Reject a Special Order Accept Since the charter will contribute to fixed costs and Since the charter will contribute to fixed costs and Worldwide has idle capacity, the company should Worldwide has idle capacity, the company should accept the flight. accept the flight. 14-16 Accept or Reject a Special Order Accept What if Worldwide had no excess capacity? If Worldwide adds the charter, it will have to cut its least profitable route that currently contributes $80,000 to fixed costs and profits. Should Worldwide still accept the charter? 14-17 Accept or Reject a Special Order Accept Worldwide has no excess capacity, so it should reject the special charter. 14-18 Accept or Reject a Special Order Accept With excess capacity . . . – Relevant costs will usually be the variable costs associated with the special order. Without excess capacity . . . – Same as above but opportunity cost of using the firm’s facilities for the special order are also relevant. 14-19 Outsource a Product or Service Outsource A decision concerning whether an item should A decision concerning whether an item should be produced internally or purchased from an be produced internally or purchased from an outside supplier is often called a “make or outside supplier is often called a “mak...
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This note was uploaded on 02/10/2014 for the course ACCT 331 taught by Professor Kline during the Fall '10 term at Drexel.

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