Response to the following:
Introduction to Managerial Accounting and Job Order Costing
Do you agree with the cost analysis for the second order? Explain your answer:
I do agree. With the unforeseen events changing the cost of business, the original quote was meant for that time. The increase in the price of dye and the competitive wages change the labor and overhead.
I am a little unsure of how these changes directly affect the immediate inventory of fabric and material considering these changes should not affect the inventory on hand but instead the inventory for the following month.
Since we do not know the amount of material Rose and Adler keep in stock, that assessment is difficult to account for. If we consider these changes to have an immediate effect, then the cost analysis seems accurate.
?Should the two orders be accounted for as one job or as two jobs?
The two orders should be considered separate.
The initial purchase was quoted for 48 seats with a promise delivery date in April. The additional 12 seats should be considered a second job. We don't know how much later the 12 seats were put on order, so let's assume the additional 12 will be using material that is affected by the new cost analysis.
With the change in costs and manufacturing overhead, not to mention now the additional 12 is expected to be delivered at the same time in April, this second order is an expedited order. Therefore, the jobs are two separate orders.
?What sales price per cover should they set for the second order? Explain why you selected this price, as well as the advantages and disadvantages of this price.
The difference in cost for the first quoted seat to second is a total of $5.20 per seat. If the initial selling price for the original request is $107.50, then the new selling price for the second order should offset the difference. The sales price per cover on the second order of 12 should be $112.70. Advantages and disadvantages would depend on the loyalty of the customer. If this is a regular customer, we may see a loss in a relationship.
If this is a new customer, we may see a loss of future business. If this is a one-off random customer, we will make up the difference in loss of income. We could honor the original quote and profit an actual revenue of $3,807.60 or we can offset the change and profit $3870.00 to make up for the $62.40 difference. The customer may see the price difference as minor because they are buying a smaller quantity and have an expedited order.
Attachment:- scenario.rar