| Course | ACC 349 Cost Accounting (ACC/349) |
|---|---|
| Week | 3 |
| Paper type | Relevant costing decision paper |
| Length | about 1,035 words, 4 double-spaced pages plus title page and references |
| Format | APA 7 student paper |
| School | University of Phoenix |
| Program | BS in Accounting |
| Updated | September 2026 |
Free sample paper for ACC 349 Week 3
Three Decisions at a Bicycle Component Maker: A Special Order for Stems, Making or Buying Seat Clamps and What to Do With an Idle Anodizing Tank
[Student Name]
University of Phoenix
ACC/349: Cost Accounting
Week 3 Assignment
[Instructor Name]
[Date]
The company, its customer and all figures are composites written for a model paper; decision methods and research findings come from the sources listed.
A composite company machines and anodizes aluminum bicycle components in a single plant: stems, handlebars and seat clamps, sold under its own brand to bike shops and made under contract for two bicycle brands. It runs one shift with some idle machine time in winter. This fall, managers faced three decisions within a month. Each could be answered with the product cost report the company already had, and each would have been answered wrongly. A product cost report answers the question of what a part cost on average; a decision asks what will change if we choose one way instead of another. This paper applies relevant costing to all three.
Decision One: A Special Order for Stems
A bicycle brand offered to buy 5,000 stems at $19 each for a new gravel bike, to be delivered over the winter. The company's regular price to bike shops is $28, and the cost report shows a full cost of $22.30 per stem, made up of $7.10 in materials, $4.20 in direct labor, $3.20 in variable overhead and $7.80 in allocated fixed overhead. The sales manager wanted to decline, since $19 is below cost.
Only costs that change with the order are relevant. The plant has winter capacity, so fixed overhead, rent, supervision and equipment depreciation, stays at its current level with or without the gravel bike stems. The variable cost per stem is $14.50. The brand wants its logo laser-etched, which requires a fixture costing $6,000. The order adds revenue of $95,000 and costs of $72,500 plus $6,000, an increase in profit of $16,500.
The order should be accepted, with conditions. The stems will carry the brand's logo, so bike shops are unlikely to see them as a discounted version of the company's own product, and the contract should state that pricing is confidential. If the order arrived during the spring rush, when the plant runs near capacity, the analysis would change, because regular sales at $28 would be displaced.
Decision Two: Making or Buying Seat Clamps
A supplier offered to supply seat clamps at $2.60 each. The company uses 60,000 a year. The cost report shows a cost to make of $3.10: materials $1.20, labor $0.80, variable overhead $0.40 and allocated fixed overhead $0.70. On that basis, buying looks cheaper.
The fixed overhead allocated to clamps will not disappear if the company buys them, except for a part-time setup technician costing $9,000 a year who works only on clamp runs. The relevant cost to make is $2.40 variable per clamp, $144,000 a year, plus the $9,000 avoidable salary, $153,000 in total. Buying costs $156,000. Without other considerations, making is $3,000 cheaper.
But capacity is not idle all year. The CNC machine used for clamps is also used for seatposts, and in spring and summer the company turns away seatpost orders. If clamps were bought, the freed machine time could produce about 4,000 more seatposts a year, each with a contribution margin of $6, adding $24,000. That forgone profit is an opportunity cost of making clamps. Adding it, making costs $177,000 against $156,000 for buying. Buying is better by $21,000.
Datar and Rajan (2021) stress that opportunity costs never appear in accounting records because no transaction occurs, which is why they are easy to miss. Qualitative factors also matter here. The supplier must meet the company's quality standard for a part that holds a rider's saddle, and a trial order of 5,000 clamps with inspection of every batch is recommended before signing a full contract.
Decision Three: The Anodizing Tank
Two years ago the company spent $140,000 on a new anodizing line with a tank sized for handlebars. A local anodizing shop now offers to anodize the company's small parts at a cost lower than running the company's second, older tank, which is used only for stems and clamps. The older tank has a book value of $38,000, and the production manager argued against closing it because the company would lose the money it had put into it.
The book value of the tank is a sunk cost. Whether the tank is kept or retired, the $38,000 has been spent. What matters are future costs: the older tank uses about $2,100 a month in chemicals, power and labor for small parts, while the outside shop would charge about $1,500 a month for the same volume, plus $200 in trucking. The tank's scrap value is about $3,000, a relevant inflow if it is sold. Outsourcing saves about $4,800 a year plus the scrap proceeds.
Arkes and Blumer (1985) found, across ten studies with students and theater patrons, that a prior payment made people more willing to keep going with a choice, even when the future payoff did not warrant it. The production manager's view is a typical example. The better question is which option costs less from today forward.
The qualitative factor here is control over turnaround time. Keeping work in house means the company sets its own schedule; outsourcing means waiting in another firm's queue during its busy season, which for anodizers is also spring. Stems for the special order must ship on schedule, and the outside shop's usual turnaround is three days. The company should try the shop on the next two production runs before retiring the tank.
The Rules Applied
Across the three decisions, the same rules held. Future revenues and costs that differ between options are relevant. Allocated fixed costs that continue either way are not. Sunk costs are never relevant. Opportunity costs must be included when capacity is limited. Garrison et al. (2021) note that relevant costing isolates these items so managers can focus on differences rather than totals.
Conclusion
The company should accept the stem order, buy seat clamps once a trial proves the supplier's quality and move small-part anodizing to the outside shop after a trial. In each case, the conclusion reached from the cost report would have been wrong: the order looked unprofitable, clamps looked cheaper to buy for the wrong reason and the old tank looked worth keeping because of its past cost.
References
Arkes, H. R., & Blumer, C. (1985). The psychology of sunk cost. Organizational Behavior and Human Decision Processes, 35(1), 124-140. https://doi.org/10.1016/0749-5978(85)90049-4
Datar, S. M., & Rajan, M. V. (2021). Horngren's cost accounting: A managerial emphasis (17th ed.). Pearson.
Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2021). Managerial accounting (17th ed.). McGraw Hill.
What the ACC 349 Week 3 instructions ask
In ACC 349 Week 3, students are generally asked to identify relevant costs and revenues and use them in short-term decisions. Typical cases include special orders, make-or-buy or outsourcing, keeping or dropping a product line or segment, selling or processing further and using a constrained resource. Students separate avoidable from unavoidable costs, recognize sunk costs as irrelevant and include opportunity costs where capacity is limited. Most prompts also ask for qualitative considerations and a recommendation. The paper usually presents the analysis in prose or simple tables with each figure explained, and it cites the textbook and any other sources in APA style while keeping the reasoning tied to the business in the case.
How this ACC 349 Week 3 example is built
A component maker was chosen because it faces all three classic decisions in one season. The special order section starts with the full product cost the sales manager used to reject the order, then rebuilds the analysis from variable costs and incremental fixed costs only. The make-or-buy section is worked twice, first without and then with the opportunity cost of the freed machine time, to show how the answer flips. The sunk cost section addresses a manager's reluctance to retire an expensive tank and links it to research on sunk-cost thinking. Each decision ends with qualitative factors and a recommendation, and a closing section lists the rules the analysis followed.
ACC 349 Week 3 grading rubric: where the points go
Faculty tend to grade the relevant costing week on whether the student includes only costs and revenues that differ between alternatives, handles fixed costs correctly and reaches a supported recommendation. Allocated fixed costs that will continue either way should be excluded, sunk costs ignored and opportunity costs included when capacity is tight. Calculations need to be correct and clearly presented, and each decision should end with a recommendation that follows from them. Qualitative factors earn credit when they are specific to the case rather than generic. Organization under headings, consistency of figures across sections and APA citations complete the rubric, and including irrelevant costs is the costliest mistake.
ACC 349 Week 3 help: mistakes to avoid
The trap most students fall into in ACC 349 Week 3 is using full cost per unit, including allocated fixed overhead, to judge a special order or an outsourcing offer. Ask of every cost whether it would change under each option. Another error is forgetting opportunity cost: if buying a part frees a machine for a more profitable product, that profit belongs in the comparison. Students also let sunk costs creep in through phrases like we already paid for it. Say plainly that past costs cannot be recovered. Check whether the special order has capacity to use and whether it could disturb regular prices. End every decision with a recommendation and the conditions that would change it.
Related ACC 349 sample papers
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- ACC 349 Week 2: Standard Costs and Variances
- ACC 349 Week 4: Budgeting and Inventory Control
- ACC 349 Week 5: Capital Decisions and Performance
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ACC 349 Week 3 questions, answered
What does ACC 349 Week 3 usually cover?
It usually covers relevant costing for short-term decisions, such as special orders, make-or-buy, dropping a product line and using constrained resources, with qualitative factors and a recommendation.
Where can I find a free ACC 349 Week 3 sample paper?
This page holds a bicycle component maker example with three decisions analyzed and annotated, open for anyone to read. We will also draft your first relevant costing paper from your own case without charge.
What is a relevant cost?
It is a future cost that differs between the alternatives being compared. Costs that are the same under every option, or that were incurred in the past, are not relevant.
Why are sunk costs irrelevant?
They have already been incurred and cannot be changed by any decision, so they do not differ between alternatives, even though people often feel bound by them.
What is an opportunity cost in a make-or-buy decision?
It is the profit given up by using capacity to make a part instead of using it for another product, and it is added to the cost of making.
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