Piper Rose Boutique has been approached by the community college to make special polo shirts for the faculty and staff. The college is willing to buy 4,000 polos with its own design for $6.00 each. The company normally sells its shirts for $12.00 each. The company has enough excess capacity to make this order. A breakdown of the costs is as follows: Direct materials $2.00 Direct labor 0.50 Variable factory overhead 1.50 Fixed factory overhead 2.50 Total cost per unit $6.50 Should Piper Rose Boutique accept the special order made by the college? Proposal to Sell Polo Shirts to College Differential revenue from accepting offer ? Differential variable costs of additional units ? Differential income (loss) from accepting the offer ? The order should be .
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Piper Rose Boutique has been approached by the community college to make special polo shirts for the faculty and staff. The college is willing to buy 4,000 polos with its own design for $6.00 each. The company normally sells its shirts for $12.00 each. The company has enough excess capacity to make this order. A breakdown of the costs is as follows:
| Direct materials | $2.00 | |
| Direct labor | 0.50 | |
| Variable factory overhead | 1.50 | |
| Fixed factory overhead | 2.50 | |
| Total cost per unit | $6.50 |
Should Piper Rose Boutique accept the special order made by the college?
| Proposal to Sell Polo Shirts to College | |
| Differential revenue from accepting offer | ? |
| Differential variable costs of additional units | ? |
| Differential income (loss) from accepting the offer |
? The order should be . |
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