Question 1 Part 1 Part 2 Jan was very concerned about making the correct decision about this special order and decided to also ask Jill, her cost accountant for an opinion on whether this order should be accepted at a price of $0.80 per bur. Jill was excited to be consulted for input on this important decision and wanted to demonstrate the power of management accounting concepts to Jan. Jill looked at the cost data and prepared the following report, It us been three years since Jan Dodge purchased land and a building and began her company, Neu Fruit Bars Ltd., in Neustadt, Ontario. The company produces only one product: a chocolate bar made with locally grows fruits such as nuspoerrics, strawberries, currents, elderberries, and other Seasonal harvests. The production plant is capable of producing 10,000 chocolate bars a month, ifrat full capacity Jan has been able to convince almost all of the smali retailers In Grey County to sell the chocolate bars in their variety stores, resulting in sales of7,000 bars a mooth. She has also been making an effort to expand into nearby flurnn Cowoty. Earlier this month (August) Jan was very excited to reccive an order from a retailer who wanted to place a one-time under for 3,000 bars in September for a two-week festival during that month. The retailer boped to feature the chocolate bar at a booth they were planning to operate at the festival. This is a huge order for Neu Fruit Bars Ltd. However, Jan was not convinced that it would benefit the business, given that the price offered by the custumer was considerably lower than the normal selling price. To help Jan with her decision making, she asked her financial accountant. Jason, for advice. She told Jason that she had received the special order for burs at a price of $0.50 per bar, compared to the usual SI. 15 per har for all other customers. Jason looked at the financial data he had used to prepare the most recent financial statements that were provided to their banker. These financial Statements adhere to GAAP. as requested by the bank. The cost to produce a chocolate bar, Jason calculated, is $0.96 per har (see below). Detailed product cost data Jason used to value finished goods inventory on the balance sheet follow: Variable costs: Cocoa Milk Sugar Berries Mixer-equipenent operator Total variable costs 50.32 DOS 0.06 0.15 0.07 $0.68 $14,400 Annual fixed costs: Production salary Property taxes production building Depreciation --production equipment Insurance production assets) 3,600 9,600 6.000 $33,600 Unit product est components Cocoa Milk Suvar Berries Mixer-cuipment operator Production supervisor salary Property taxes production building Depreciation production wpment Insurance (productie assets) Total $0.32 D.ON 01.06 0.15 0.07 0.12 0.03 0.08 0.05 $0.96 Jill presented the above information to Jan, explaining that the cost behaviour of the various cost inputs must be considered. That is, variable costs increase with each bar sold. Therefore, for each of the 3,000 bars produced as part of the special order the company must huy cocon, milk, sugar, and berries. On the other hand, Fill insisted that the special order would not cause fixed costs to change. Specifically, the salaries of the production stat (the bars can be produced with the hours of a normal production slitt), property taxes, depreciation, and insurance would be unchanged regardless of whether the order is accepted. Jan thanked Jill for the information and explanations, but felt even more confused about whether this order was a good deal for the company Required: Based on the product cast data provided by Jason, what advice would you give to Jan regarding the special order? (5 marks) Required: a) Do you agree with the explanations provided by Jill? What advice would you provide Jan about the special order? Show calculations to support your advice. (7 marks) b) Are there other non financial considerations that Jan should weigh in her decision
