Ace Fertilizer Ima
Ace Fertilizer Company
Abby Conroy was tasked with calculating an effective quote for Breeland Ltd., she chose the activity based accounting costing system since it more accurately captures the related costs. A special order was placed by Breeland Ltd. with Ace Fertilizer Company. The did not plan to order more of this product in the future. Based on Ace’s policy, the special order included disposal costs for any used materials in the event no other orders existed for the unused materials at the time the Breeland contract was signed. Abby correctly calculated the total direct material and labor costs and accurately arrived at the indirect costs using the ABC method and used cost activity pools that make sense for the company and product. She incorrectly included the organization-sustaining costs which are not related to any specific product so should not be included. Abby incorrectly calculated the mark up cost by dividing 80% from the cost rather than multiplying so the markup and the total cost to Breeland has been overstated by $193,500. This would ultimately produce a higher profit with lower costs and a higher customer margin but would be inconsistent with Ace 80% markup policy. Revisions could be made and an accurate quote could be provided to Tom Brennen for approval.
During personal time over the weekend, George was presented with a possible opportunity to sell the unused portion of Breelands special order materials to his brother Josh. On Monday, George wanted to leave the Breeland quote as is, whereas Abby wanted to revise it to exclude the sale of materials to Josh plus additional charges. George is correct to leave the quote unchanged, since there are no new orders for the additional XO-1600 yet even though he and Josh discussed it during personal time. Company policy dictates that the special order customer would be billed for unused materials in the absence of another existing order for the same materials. It would be putting the
Abby Conroy was tasked with calculating an effective quote for Breeland Ltd., she chose the activity based accounting costing system since it more accurately captures the related costs. A special order was placed by Breeland Ltd. with Ace Fertilizer Company. The did not plan to order more of this product in the future. Based on Ace’s policy, the special order included disposal costs for any used materials in the event no other orders existed for the unused materials at the time the Breeland contract was signed. Abby correctly calculated the total direct material and labor costs and accurately arrived at the indirect costs using the ABC method and used cost activity pools that make sense for the company and product. She incorrectly included the organization-sustaining costs which are not related to any specific product so should not be included. Abby incorrectly calculated the mark up cost by dividing 80% from the cost rather than multiplying so the markup and the total cost to Breeland has been overstated by $193,500. This would ultimately produce a higher profit with lower costs and a higher customer margin but would be inconsistent with Ace 80% markup policy. Revisions could be made and an accurate quote could be provided to Tom Brennen for approval.
During personal time over the weekend, George was presented with a possible opportunity to sell the unused portion of Breelands special order materials to his brother Josh. On Monday, George wanted to leave the Breeland quote as is, whereas Abby wanted to revise it to exclude the sale of materials to Josh plus additional charges. George is correct to leave the quote unchanged, since there are no new orders for the additional XO-1600 yet even though he and Josh discussed it during personal time. Company policy dictates that the special order customer would be billed for unused materials in the absence of another existing order for the same materials. It would be putting the