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Should bagus berhad accept the special order

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Reference no: EM132592935

Bagus Berhad produces melamine wardrobes for homebuilders across the Peninsular of Malaysia. The cost of producing 500 wardrobes is as follows:

RM

Materials 500,000

Labor 250,000

Variable overhead 100,000

Fixed overhead 400,000

Total 1,250,000

  • Bagus Berhad also incurs selling expenses of RM200 per wardrobe. Bagus Berhad sells the wardrobe at normal price of RM3,500 per unit.
  • In June 2019, Bijak Berhad has offered Bagus Berhad RM2,200 per wardrobe for a special order of 1,000 wardrobes. Under this special order, selling expenses per wardrobe would be only RM130 per wardrobe. Bagus Berhad has available capacity to do the work.

Required:

Question (a) Should Bagus Berhad accept the special order? Why or why not?

Question (b) Give THREE (3) considerations that management should consider in making its decision in accepting special order?

Reference no: EM132592935

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