Joan Hildabrand is analyzing some cost data for her boss, Ross Cumings. The data relate to a special sales order that Pickmore International is considering from a large customer in Singapore. The following data are applicable to the product being ordered: Normal unit sales price . . . . . . . . . . . . . . .

Chapter 21, Practice Exercises #63

Joan Hildabrand is analyzing some cost data for her boss, Ross Cumings. The data relate to a special sales order that Pickmore International is considering from a large customer in Singapore. The following data are applicable to the product being ordered:

Normal unit sales price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $49.95

Variable unit manufacturing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.50

Variable unit selling and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18.25

The customer is requesting that the sales order be accepted on the following terms:

a. The unit sales price would equal the normal unit contribution margin plus 10%.

b. Freight would be paid by the customer.

c. Pickmore International would pay a $5,000 “facilitating payment” to a “friend of the customer” to get the product through customs more quickly. In considering the order, Ross has indicated to Joan that this is a very important customer. Furthermore, this work would help some employees earn a little extra Christmas money with overtime.

1. What are the accounting and ethical issues involved in this case?

2. Should Joan recommend acceptance of the sales terms proposed for this special order?


Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...

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