ACKNOWLEDGEMENT

This research report has been prepared during fall 2018 at Bahria
University, Islamabad in fulfillment of Cost and Managerial
Accounting [ACC-503] project.
It was arguably one of the most thrilling experiences of this
semester and we would like to acknowledge all those people who
helped us throughout and made this work possible.
Thanks to Allah Almighty for giving us the skill as well as the will to
survive with our head held high throughout. To our parents and family
who have supported us,
Our salutes to our respected Madam Saher Zeast for giving us chance
and polishing us manifold. It was undoubtedly impossible to complete
this project without her valuable advice, encouragement, direction, and
assistance. Her excellent supervision and knowledge during the whole
process helped us in completing this project.

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 Table of Contents
Chapter one - Introduction

Problem Statement ............................................................................ 3

Purpose ............................................................................................. 3

Company background ........................................................................ 3

Revenue model .................................................................................. 3

CSR .................................................................................................... 3

Chapter Two - Methodology

Sample Size ........................................................................................ 4
Research Instrument .......................................................................... 4
Scope & Limitations .......................................................................... 4
Chapter Three- Analysis & Results
Analysis ............................................................................................. 5
Chapter four – Decision
Question ............................................................................................ 5
Chapter – five Solution
Solution ............................................................................................. 7
References ......................................................................................... 8

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Intoduction
Problem Statement
Decide and determine wether special order should be accepted or
not,either using full or idle capacity.
Purpose:
 To identify and explain all relevent and irrelevent costs associated
with accounting project.
 Explaning how to accept or reject a special order.
 Finding anyother consideration that can aid in analysis.
Company Background:
The Gloria Jean’s Coffees story began in 1979 in Long Grove III a small
town just north of Chicago, USA where they offer specialty coffees in a
warm and friendly atmosphere.
Gloria Jean's Coffees is a specialty coffeehouse company that has
opened more than 1,000 coffee houses across 39 markets worldwide,
including over 460 in Australia. In 2014 Gloria Jean’s was purchased by
the Retail Food Group for $163.5 million

Business Model:
The Gloria Jean's Coffees business model is a franchising system similar
to many other food chains
Corporate Social Responsbility:
The Gloria Jean's Coffees is a proud supporter of numerous Australian
societies. Similarly Gloria Jean's Coffee Pakistan takes pride in its social
responsibility. Locally Gloria Jean's Coffees Pakistan is supporting care
foundation for providing affordable quality education to under
privileged children, currently managing 182 schools in Lahore. Gloria
Jean's Coffees further collaborate with Rising Sun Institute of Pakistan.

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Methodology:
Sample Size:
Our sample size is n=1.We used secondary data Analysis/Archival study
to the gather and analyze information about acceptance and rejection
of any special order. While gathering the required information we came
to know that company had to frequently encounter such situation
where they had to make a decision of accepting or rejecting a special
order.
Research Instrument:
The research instrument that we used was secondary data
Analysis/Archival study. To be more precise we used secondary data
that was available on internet.
Scope and limitation:
Scope:
 This project can be very helpful for all those who have a desire of
earning a comprehensive knowledge about acceptance and
rejection of business proposals.
 It can help the accounting students to get a grip on carrying out
research on accounting problems.
 It can highlight the concerns about ethical issues that are
encountered by accountants.

Limitations:
 This report could have been strengthened if viewpoints of other
public in Gloria jean’s Coffee house were taken.
 This study was faced with time-constraint. Therefore more time
can be spent get a more comprehensive overview.

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Analysis:

After analyzing the data we come to know that in real world business,
to run the business budget and resources are most important factors.
While on the other hand cost, sales and profit also has utmost same
importance. Other important factor that we encountered was to
differentiate between relevant and irrelevant costs to make effective
decisions.

All the costs that were incurred in past are irrelevant costs. They are
also known as “historical” or “sunk cost”. They are irrelevant cost
because they are already incurred and do not have direct impact on
present order.

Any fixed cost which is traceable with cost is known as traceable cost
and it is relevant cost. Allocated fixed cost is irrelevant cost and does
not included in decision making.

Variable cost is 100% relevant cost.

So simply speaking any cost which effects your decision is relevant cost.
While making decision we have to ignore the sunk cost because it has
no effect on future decisions.

Question:

Gloria jean’s makes coffees for extreme wild coffee lovers. There
manufacturing plant have a capacity of making 12000 cups of coffee
per month. Current monthly production is 9500 cups of coffee. The
company normally charges RS 370 per cup of coffee. The variable and
fixed manufacturing costs per unit for the current activity are as
follows.

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Data:

RS

Direct Labor…………………………………………………………………. 70

Direct Material…………………………………………………………….180

Variable Manufacturing overhead…..…………………………….30

Fixed manufacturing overhead……………………………………..50

Gloria Jean’s received a special order for 800 cups of coffee at RS.320
per cup of coffee from Japan Embassy. We are required to evaluate this
order and recommending whether the company should accept or reject
this order.

Required:

1: What are the costs that will be relevant to analysis of special order
by Gloria Jean’s?

2: Determine if Gloria Jean’s should accept the special order?

Compute the average unit cost and the incremental cost for the
special order and explain your answer.

3: Discuss any other consideration that Gloria Jean’s should consider

in his analysis of the special order.

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Solution:

1: The relevant cost in the analysis of the special order is that expected
future costs which are applicable a special order & will affect your
decision.

Since the order is being received directly by Gloria Jean’s so variable

marketing cost will be irrelevant cost, because the additional
marketing cost will not be incurred for this order.

Only the variable cost of direct material and direct labor are relevant.

The fixed cost is not relevant because no additional capital investment

is needed to fulfill this order.

2:

Sale price………………………………………..320

Manufacturing cost

Direct material……………………180

Direct labor…………………………70

Variable FOH………………………30

Total manufacturing cost= 280

Contribution Margin = 40*800=32000

The firm is operating below the full capacity and will certainly cater this
order because it will increase revenue by 32000.

3: Other considerations that Gloria Jean’s must include in analysis of

special order are

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It is possible that problem can arise with other customers that would
eventually pressurize Gloria Jean’s for similar treatment.

The future customer potential of Japan Embassy can generate

additional revenue.

References:

https://www.google.com/search?q=gloria+jeans+coffee+official+web
site&rlz=1C1CHBF_enPK824PK824&oq=gloriajeans+coffie+off&aqs=ch
rome.2.69i57j0l5.25039j0j7&sourceid=chrome&ie=UTF-8

http://www.rfg.com.au/shareholder-center/annual-reports/

https://en.wikipedia.org/wiki/Gloria_Jean%27s_Coffees

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