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Golden Croft Furniture. a highquality manufacturer. has just received a offer from a large wholesaler for a single hatch of goods. The o'ered price is
Golden Croft Furniture. a highquality manufacturer. has just received a offer from a large wholesaler for a single hatch of goods. The o'ered price is P433000. which is about P12.000 less than the normal for similar work. Golden Craft has never done business with the wholesaler, and the sales manager wants to get a foot in the door. She is sure that existing sales would he unaected by the special order and wants to accept the order if my prot can he made. The production manager provided the following emanates of cost for the order: Materials. F12.000: Direct labor at 3.000 hrs. F10.000: and Overhead. P15.000 or a total of P45,000The production manager informed you that the occa'head cost is hosed on the overhead application rate of P5 per direct lahor hour. The rate includes hoth xed and variable overhead and was based on 150,000 expected direct labor hours and P300,000 budgeted total overhead costs. The production manager told you that the dierence in roles is due- to the di'ermee in budgeted direct labor hoursthe cost structure is the same this year as last year. Required: 1. Prepare calculation to determine the incremental cost of the order. Should the offer he accepted? 2. What other factors should be considered in deciding whether to accept this special order? Justify. Tips in answering this case 1. Consider to accept the order. determine the insistententoir cost, compare it to the rose! revenues. 2. Ejct ofspem'el order and explain other considerations
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