.comilm/tak Calculato Decision on Accepting Additional Business Down Home Jeans

Question

.comilm/tak Calculato Decision on Accepting Additional Business Down Home Jeans Co. has an annual plant capacity of 66,400 units, and current production is 43,000 units, Monthly fixed costs are $38,000, and varial costs are $25 per unit. The present selling price is $32 per unit. On November 12 of the ourrent yeac, the company received an offer from Fields Compua 16,400 units of the product at $27 each. Fields Company will market the units in a foreign country under its own brand name. The additional business i expected to affect the domestic selling price or quantity of sales of Down Home Jeans Co. a. Prepare a differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Fields order. If an amount is zer enter zero "0. For those boxes in which you must enter subtracted or negative numbers use a minus sign Daterential Analysis Reject Order (Alt. 1) or Accept Onder (Alt. 2) November 12 Accept Dhitferential tffect Attemative 1) Atenatiwe 2) Ate matime 2 Variable manfacturing costs Income (oss) v to this decision. The differential revense is than the differential cot b. Having unused capacity available is Thus, accepting this additional business wit result in a net c. What is the minimumi price per unit that weuld produoe a positive contributien marpin? Round your ansser to two decimal places. Previous 2 more Check My Work uses remaming F 12 ys RaBrea Backspace 8 9 Y U O P HU K L Enter

Explanation / Answer

a)

b)1)Beneficial

2)more than

3)Net income

c)minimum price per unit that would produce a positive contribution margin will be equal to variable manufacturing cost = $ 25 per unit

Reject order Accept order Differential effect on income Revenue 0 16400*27=442800 442800 cost variable manufacturing cost (0) 16400*25=(410000) (410000) Income /(loss) 0 32800 32800

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