6- Decision on Accepting Additional Business Down Home Jeans Co. has an annual p

Question

6- Decision on Accepting Additional Business Down Home Jeans Co. has an annual plant capacity of 64,400 units, and current production is 46,400 units. Monthly fixed costs are $41,200, and variable costs are $25 per unit. The present selling price is $36 per unit. On November 12 of the current year, the company received an offer from Fields Company for 15,700 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 is not 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 zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

b. Having unused capacity available is to this decision. The differential revenue is than the differential cost. Thus, accepting this additional business will result in a net .

c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places.
$

1-Felix Company owns a equipment with a cost of $361,500 and accumulated depreciation of $54,700 that can be sold for $276,100, less a 4% sales commission. Alternatively, Felix Company can lease the equipment to another company for three years for a total of $287,200, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Felix Company on the equipment would total $16,600 over the three years.

Prepare a differential analysis on March 23 as to whether Felix Company should lease (Alternative 1) or sell (Alternative 2) the equipment. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis Reject Order (Alt. 1) or Accept Order (Alt. 2) November 12 Reject
Order
(Alternative 1) Accept
Order
(Alternative 2) Differential
Effect
on Income
(Alternative 2) Revenues $ $ $ Costs: Variable manufacturing costs Income (Loss) $ $ $

Explanation / Answer

ans 1 Reject Accept Differential Order Effect Order (Alternative 2) on Income (Alternative 1) (Alternative 2) Revenues $0 423900 $423,900 (15700*27) Costs: Variable manufacturing costs $0 392500 ($392,500) (15700*25) Income (Loss) $0 $31,400 $31,400 Ans b Relevant to the decision Differential revenue is more than differential cost Net gain ans c Positive contribution margin is the price above the variable cost $25.01 Dear student I have answered the first question

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