Background:

As the senior accountant at Technology on Demand (TOD), which manufactures flip phones, smartphones, notebooks, and smartwatches, you are responsible for assisting with employee related questions.

TOD manufactures mobile technology such as flip phones, smartphones, notebooks, and smartwatches in bulk quantity on the same type of product with no variations. However, Michael Clark, sales department manager, is considering taking special orders in an effort to further advance sales. If this is possible, he would like to begin with the smartphones as a pilot project. The smartphones itself would remain the same; however, the client would have the option of customizing certain features such as technology options and potentially other add on features, which may call for another department within the production department.

Michael has asked you:

• Can you explain if it is possible for production and accounting to manage the smartphone pilot project? What type of costing system would this be called? Explain the process.
• What would the difference in the costing system be, if any, from what it is now?
• What additional documentation would be needed for the custom work?
• Would you have any thoughts or concerns on this type of change in processing?

In consideration of the background, prepare a memo in a Word document to submit to the sales department manager, Michael Clark, with a cc to the controller.