CBE is evaluating a special order it has received for a ceramic fixture to be used in aircraft engines. CBE has recently been operating at less than full capacity, so the firm's management will accept the order if the price offered exceeds the costs that will be incurred in producing it. You have been asked for advice on how to determine the cost of two raw materials that would be required to produce the order. a. The special order will require 800 gallons of zante, a highly perishable material that is purchased as needed. CBE currently has 1,200 gallons of zante on hand, since the material is used in virtually all of the company's products. The last time endor was purchased, CBE paid $5.00 per gallon. However, the average price paid for the zante in stock was only $4.75. The market price for zante is quite volatile, with the current price at $5.50. If the special order is accepted, CBE will have to place a new order next week to replace the 800 gallons of zante used. By then the price is expected to reach $5.75 per gallon. Use cost terminology and comment on each of the cost figures above. What is the real cost of zante if the special order is produced?

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Net Income under the Allowance Method The allowance method is used to account for potential bad debts Under this method an estimate of uncollectible a... View the full answer