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Calculate the opportunity cost of accepting special order

Assignment Help Managerial Accounting
Reference no: EM132253463

Objectives

• To develop an ability to identify and assume an assigned role.
• To be able to identify and rank the importance of explicit issues.
• To illustrate the importance of hidden (undirected) issues that arise from a detailed analysis.
• To identify accounting issues (GAAP/IFRS compliance issues), assess their implications, generate alternatives, and provide recommendations within the bounds of GAAP/IFRS to meet the client's needs.
• To examine how accounting standards impact financial measures (ratios, covenants, etc.).
• To prepare a coherent report and integrated analysis that meets specific user needs.

Instructions

In order to complete your case analysis successfully
• identify the role you are playing,
• assess the financial reporting landscape considering the user needs, constraints, and business environment,
• identify the issues,
• analyze the issues (qualitatively and quantitatively), and
• provide a recommendation and conclusion.

An average grade will result from answering all questions with basic coverage and accuracy, showing all your work. Additional points come from including greater detail, astute, informed commentary where appropriate and connections to readings and other content.
Respond in a single Word doc (or comparable text editor).

Background
You have recently been promoted to Senior Consultant for the professional service firm, BUSI 2083 LLP thanks in part to the hard work in leading the engagement for your client Perfect Stitch. Your firm specializes in providing a wide variety of internal business solutions for different clients. After a weekend of celebrations from your promotion, a Senior Manager calls you into her office first thing Monday morning to help with a technology client who is making a tough decision about closing a plant.

Is Diane's general approach to calculating the opportunity cost in terms of the physical units involved correct? Explain.

Assuming productive capacity cannot be increased for either machine in December, how many PVRs would TBD have to forgo selling to existing customers to fill the special order from Fitch Limited?

Calculate the opportunity cost of accepting the special order.

Calculate the net effect on profits of accepting the special order.

What are some qualitative issues that should be considered when accepting special orders such as that proposed by Fitch Limited?

Attachment:- case.rar

Verified Expert

Tiny Bits Digital (TBD) should accept the special order from Fitch Limited, a large retailer for audio and video products, high-definition personal video recorder (PVR), one of the most popular products of TBD because the special order improves the operating profitability by $8,000 from exiting operating profitability $72,000 to $80,000. The acceptance of the special order will also improve the market space and competitiveness of TBD for approaching wide range of customers in the new market areas.

Reference no: EM132253463

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Reviews

len2253463

3/11/2019 4:15:47 AM

Case Analysis 4 will be marked in its entirety out of 100. The following rubric indicates the criteria students are to adhere to, and their relative weights to the assignment overall. Activity/Competencies Demonstrated % of Final Grade 1. Identification and Analysis of Issues (80%) a. Analyze the general approach to opportunity cost /15 b. Calculate how many PVRs TBD would forgo to existing customers to fill the special order /15 c. Calculate the opportunity cost of accepting the special order /15 d. Calculate the net effect on profits of accepting the special order /15 e. At 75% capacity, what is the minimum price TBD should accept on the special order /20 2. Recommendation (20%) a. Provide a recommendation, including qualitative considerations when accepting special orders such as the one proposed by Fitch. /20 Total /100

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