ch12-AFM102s2012

Increase in revenue 3000 10 i ncrease in costs 3000

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Unformatted text preview: 0 24,000 $ 6,000 Note: This answer assumes that fixed costs are unaffected by the order and that variable marketing costs must be incurred on the special order. costs Managerial Accounting 12-27 Special Order Decisions focus on relevant costs and benefits if excess capacity exists, focus on: incremental revenues from the order incremental costs of filling the order (variable & fixed) do not focus on irrelevant costs and benefits if operating at capacity, also consider opportunity cost of filling the order ignore allocated common costs, sunk costs and other costs unaffected by the special order consider qualitative factors total relevant costs = incremental costs + opportunity costs Managerial Accounting 12-28 Special Order Decisions Decision rule: Accept if: incremental revenues > incremental costs + opportunity costs Reject if: incremental revenues < incremental costs + opportunity costs Managerial Accounting 12-29 Joint Costs and Joint Products In some industries, a number of end products are produced from a single raw material input. Two or more products produced from a common input are called joint products. joint products The point in the manufacturing process wher...
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