Ace Fertilizer Company

Abby Conroy was tasked with calculating an effective quote for Breeland Ltd., she chose the activity based accounting costing system since it more accurately captures the related costs. A special order was placed by Breeland Ltd. with Ace Fertilizer Company. The did not plan to order more of this product in the future. Based on Ace’s policy, the special order included disposal costs for any used materials in the event no other orders existed for the unused materials at the time the Breeland contract was signed. Abby correctly calculated the total direct material and labor costs and accurately arrived at the indirect costs using the ABC method and used cost activity pools that make sense for the company and …show more content…

It could be argued that he is providing the quote fairly and objectively but, it lacks the insight of how the new client would change the numbers in Breeland’s favor and precludes the possibility of client double billing, an important fact to support disclosure of all relevant information communicated fairly and objectively. I think Abby is correct in advising George that a possible rework of the quote is in order although based on the confirmed information, the current Breeland bid should go forward as is with a caveat that it could change with the confirmation of Josh as a new client if he is engaged before the Breeland quote is signed. Since the meeting will take place between George and Tom on Wednesday and the details of Joshs’ possible purchase are expected to become known ‘later in the week’, it makes sense to wait a day or two before making the decision. It is also possible that Josh may not make the purchase. Ace is one of the few companies’ nationally that is able to produce the product, it seemly unlikely that Ace would risk losing their business by asking for a few extra days to confirm final details of the quote. No mention of Josh’s possible order is necessary. Tom should be given full disclosure by George of the impact on profitability of both scenarios. These would include: 1). the order ‘as is’ without the prospect of Josh placing an order, 2). the revised order based on