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  • Budgeting Book 3

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    Mackay Family
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    The document discusses three decision scenarios: whether to accept or reject a special order, whether to make or buy a component, and whether to sell a product as-is or process it further. For each scenario, it lists the relevant costs and revenues to consider in the decision, such as opportunity costs, avoidable costs, sales revenue, and profit. The first scenario also provides formulas for calculating the minimum price and maximum sacrifice amount.

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    The document discusses three decision scenarios: whether to accept or reject a special order, whether to make or buy a component, and whether to sell a product as-is or process it further. For each scenario, it lists the relevant costs and revenues to consider in the decision, such as opportunity costs, avoidable costs, sales revenue, and profit. The first scenario also provides formulas for calculating the minimum price and maximum sacrifice amount.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    7 views1 page

    Budgeting Book 3

    Uploaded by

    Mackay Family
    The document discusses three decision scenarios: whether to accept or reject a special order, whether to make or buy a component, and whether to sell a product as-is or process it further. For each scenario, it lists the relevant costs and revenues to consider in the decision, such as opportunity costs, avoidable costs, sales revenue, and profit. The first scenario also provides formulas for calculating the minimum price and maximum sacrifice amount.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 1

    Reject or Accept the Order

    Accept
    Sales Revenue
    Less: Costs
    Opportunity Costs
    Profit

    Minimum Price = Incremental Cost + Opportunity Cost

    Maximum Sacrifice = TCM of Special Order / UCM of Regular Sales

    Regular Sales to lose = Total CM Special Order / Unit CM Regular Sales

    Make or Buy Component


    Make

    Avoidable Costs (xx)


    Opportunity Costs (xx)
    Relevant Cost

    Buy
    Avoidable Costs (xx)

    Relevant Cost

    Sell or Process Further


    Process Further

    Sales Revenue
    Less: Costs
    Profit

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