{"id":626,"date":"2018-04-19T20:04:18","date_gmt":"2018-04-19T20:04:18","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/?post_type=chapter&#038;p=626"},"modified":"2024-04-29T17:34:40","modified_gmt":"2024-04-29T17:34:40","slug":"special-order-decisions","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/chapter\/special-order-decisions\/","title":{"raw":"Special Order Decisions","rendered":"Special Order Decisions"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Create a report outlining the data to support a special order decision<\/li>\r\n<\/ul>\r\n<\/div>\r\nLet's return to relevant revenues and costs, with a Hupana Running Company special order. They are a company facing a special order for fuchsia high tops. Here is a run-down of the special order:\r\n<table style=\"border-collapse: collapse; width: 100%;\" border=\"1\">\r\n<tbody>\r\n<tr style=\"height: 15px;\">\r\n<td style=\"width: 100%; text-align: center; height: 15px;\" colspan=\"2\"><em><b>Special Order: Fuchsia\u00a0High Tops<\/b><\/em><\/td>\r\n<\/tr>\r\n<tr style=\"height: 15px;\">\r\n<td style=\"width: 67.6556%; height: 15px;\">Revenue (50 pair @ $150 each)<\/td>\r\n<td style=\"width: 32.3444%; height: 15px; text-align: right;\">$7,500<\/td>\r\n<\/tr>\r\n<tr style=\"height: 15px;\">\r\n<td style=\"width: 67.6556%; height: 15px;\"><strong>Expenses<\/strong><\/td>\r\n<td style=\"width: 32.3444%; height: 15px; text-align: right;\"><\/td>\r\n<\/tr>\r\n<tr style=\"height: 30px;\">\r\n<td style=\"width: 67.6556%; height: 30px;\">Material: Fuchsia (50\u00a0\u00d7 7 units x $3.5 per unit)<\/td>\r\n<td style=\"width: 32.3444%; height: 30px; text-align: right;\">$1,225<\/td>\r\n<\/tr>\r\n<tr style=\"height: 15px;\">\r\n<td style=\"width: 67.6556%; height: 15px;\">Direct Labor (50 \u00d7 .8 \u00d7 $30)<\/td>\r\n<td style=\"width: 32.3444%; height: 15px; text-align: right;\">$1,200<\/td>\r\n<\/tr>\r\n<tr style=\"height: 30px;\">\r\n<td style=\"width: 67.6556%; height: 30px;\">Variable overhead (30 hours \u00d7 $3 per hour)<\/td>\r\n<td style=\"width: 32.3444%; height: 30px; text-align: right;\">$90<\/td>\r\n<\/tr>\r\n<tr style=\"height: 15px;\">\r\n<td style=\"width: 67.6556%; height: 15px;\"><strong>Total variable expenses<\/strong><\/td>\r\n<td style=\"width: 32.3444%; height: 15px; text-align: right;\"><strong>$2,515<\/strong><\/td>\r\n<\/tr>\r\n<tr style=\"height: 15px;\">\r\n<td style=\"width: 67.6556%; height: 15px;\"><\/td>\r\n<td style=\"width: 32.3444%; height: 15px; text-align: right;\"><\/td>\r\n<\/tr>\r\n<tr style=\"height: 15px;\">\r\n<td style=\"width: 67.6556%; height: 15px;\"><strong>Fixed Expense<\/strong><\/td>\r\n<td style=\"width: 32.3444%; height: 15px; text-align: right;\"><\/td>\r\n<\/tr>\r\n<tr style=\"height: 15px;\">\r\n<td style=\"width: 67.6556%; height: 15px;\">Dye for material cutter<\/td>\r\n<td style=\"width: 32.3444%; height: 15px; text-align: right;\">$1,200<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 67.6556%;\"><\/td>\r\n<td style=\"width: 32.3444%; text-align: right;\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 67.6556%;\">Total Expenses for Special Order<\/td>\r\n<td style=\"width: 32.3444%; text-align: right;\">$3,775<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 67.6556%;\"><strong>Incremental net operating income<\/strong><\/td>\r\n<td style=\"width: 32.3444%; text-align: right;\"><span style=\"text-decoration: underline;\"><strong>$3,725<\/strong><\/span><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\nSince a special order is a one-time order, that is not part of a company\u2019s regular business operation. Effective analysis needs to be done to insure that a special order will bring additional revenue to a company and not use space or time that would have been better used for the regular product lines.\r\n\r\nAs a manager, it may be your responsibility to figure out if a special order should be taken, and if so, you will need to calculate how much should be charged for the order. You will also need to make sure that you have the time available in your production schedule to handle the extra work. Creating a report outlining the data to support a special order decision, like the one above, will help you make those important decisions.\r\n\r\nIn Hupana Running Company\u2019s case, the revenue for the special order high-tops is sufficient to cover the additional costs incurred to make them. They need to make sure to account for things like special equipment or materials that might increase the costs.\r\n\r\nHupana needs to pay overtime to complete this order, but still made a nice profit on this special order. There may be additional things to consider from the qualitative standpoint. In other words, it isn\u2019t always about the money! Perhaps the exposure will bring additional sales of the regular line of shoes, or other teams may want to order shoes.\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Questions<\/h3>\r\nhttps:\/\/assess.lumenlearning.com\/practice\/8da161d6-ecaf-4b78-8604-b9703b8987ed\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Create a report outlining the data to support a special order decision<\/li>\n<\/ul>\n<\/div>\n<p>Let&#8217;s return to relevant revenues and costs, with a Hupana Running Company special order. They are a company facing a special order for fuchsia high tops. Here is a run-down of the special order:<\/p>\n<table style=\"border-collapse: collapse; width: 100%;\">\n<tbody>\n<tr style=\"height: 15px;\">\n<td style=\"width: 100%; text-align: center; height: 15px;\" colspan=\"2\"><em><b>Special Order: Fuchsia\u00a0High Tops<\/b><\/em><\/td>\n<\/tr>\n<tr style=\"height: 15px;\">\n<td style=\"width: 67.6556%; height: 15px;\">Revenue (50 pair @ $150 each)<\/td>\n<td style=\"width: 32.3444%; height: 15px; text-align: right;\">$7,500<\/td>\n<\/tr>\n<tr style=\"height: 15px;\">\n<td style=\"width: 67.6556%; height: 15px;\"><strong>Expenses<\/strong><\/td>\n<td style=\"width: 32.3444%; height: 15px; text-align: right;\"><\/td>\n<\/tr>\n<tr style=\"height: 30px;\">\n<td style=\"width: 67.6556%; height: 30px;\">Material: Fuchsia (50\u00a0\u00d7 7 units x $3.5 per unit)<\/td>\n<td style=\"width: 32.3444%; height: 30px; text-align: right;\">$1,225<\/td>\n<\/tr>\n<tr style=\"height: 15px;\">\n<td style=\"width: 67.6556%; height: 15px;\">Direct Labor (50 \u00d7 .8 \u00d7 $30)<\/td>\n<td style=\"width: 32.3444%; height: 15px; text-align: right;\">$1,200<\/td>\n<\/tr>\n<tr style=\"height: 30px;\">\n<td style=\"width: 67.6556%; height: 30px;\">Variable overhead (30 hours \u00d7 $3 per hour)<\/td>\n<td style=\"width: 32.3444%; height: 30px; text-align: right;\">$90<\/td>\n<\/tr>\n<tr style=\"height: 15px;\">\n<td style=\"width: 67.6556%; height: 15px;\"><strong>Total variable expenses<\/strong><\/td>\n<td style=\"width: 32.3444%; height: 15px; text-align: right;\"><strong>$2,515<\/strong><\/td>\n<\/tr>\n<tr style=\"height: 15px;\">\n<td style=\"width: 67.6556%; height: 15px;\"><\/td>\n<td style=\"width: 32.3444%; height: 15px; text-align: right;\"><\/td>\n<\/tr>\n<tr style=\"height: 15px;\">\n<td style=\"width: 67.6556%; height: 15px;\"><strong>Fixed Expense<\/strong><\/td>\n<td style=\"width: 32.3444%; height: 15px; text-align: right;\"><\/td>\n<\/tr>\n<tr style=\"height: 15px;\">\n<td style=\"width: 67.6556%; height: 15px;\">Dye for material cutter<\/td>\n<td style=\"width: 32.3444%; height: 15px; text-align: right;\">$1,200<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 67.6556%;\"><\/td>\n<td style=\"width: 32.3444%; text-align: right;\"><\/td>\n<\/tr>\n<tr>\n<td style=\"width: 67.6556%;\">Total Expenses for Special Order<\/td>\n<td style=\"width: 32.3444%; text-align: right;\">$3,775<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 67.6556%;\"><strong>Incremental net operating income<\/strong><\/td>\n<td style=\"width: 32.3444%; text-align: right;\"><span style=\"text-decoration: underline;\"><strong>$3,725<\/strong><\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Since a special order is a one-time order, that is not part of a company\u2019s regular business operation. Effective analysis needs to be done to insure that a special order will bring additional revenue to a company and not use space or time that would have been better used for the regular product lines.<\/p>\n<p>As a manager, it may be your responsibility to figure out if a special order should be taken, and if so, you will need to calculate how much should be charged for the order. You will also need to make sure that you have the time available in your production schedule to handle the extra work. Creating a report outlining the data to support a special order decision, like the one above, will help you make those important decisions.<\/p>\n<p>In Hupana Running Company\u2019s case, the revenue for the special order high-tops is sufficient to cover the additional costs incurred to make them. They need to make sure to account for things like special equipment or materials that might increase the costs.<\/p>\n<p>Hupana needs to pay overtime to complete this order, but still made a nice profit on this special order. There may be additional things to consider from the qualitative standpoint. In other words, it isn\u2019t always about the money! Perhaps the exposure will bring additional sales of the regular line of shoes, or other teams may want to order shoes.<\/p>\n<div class=\"textbox tryit\">\n<h3>Practice Questions<\/h3>\n<p>\t<iframe id=\"assessment_practice_8da161d6-ecaf-4b78-8604-b9703b8987ed\" class=\"resizable\" src=\"https:\/\/assess.lumenlearning.com\/practice\/8da161d6-ecaf-4b78-8604-b9703b8987ed?iframe_resize_id=assessment_practice_id_8da161d6-ecaf-4b78-8604-b9703b8987ed\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:300px;\"><br \/>\n\t<\/iframe>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-626\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Special Order Decisions. <strong>Authored by<\/strong>: Freedom Learning Group. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":62559,"menu_order":10,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Special Order Decisions\",\"author\":\"Freedom Learning Group\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"f9acb49e-e3f1-4650-91f8-2048b86c69f7, 2da6566f-d641-4540-a3b6-c3df97510691","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-626","chapter","type-chapter","status-publish","hentry"],"part":111,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/626","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/users\/62559"}],"version-history":[{"count":13,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/626\/revisions"}],"predecessor-version":[{"id":4155,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/626\/revisions\/4155"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/parts\/111"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/626\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/media?parent=626"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapter-type?post=626"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/contributor?post=626"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/license?post=626"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}