Decision on Accepting Additional Business Down Home Jeans Co. has an annual plan
ID: 2478977 • Letter: D
Question
Decision on Accepting Additional Business
Down Home Jeans Co. has an annual plant capacity of 64,800 units, and current production is 45,100 units. Monthly fixed costs are $39,200, and variable costs are $25 per unit. The present selling price is $35 per unit. On February 2, 2014, the company received an offer from Fields Company for 15,500 units of the product at $29 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 on whether to reject (Alternative 1) or accept (Alternative 2) the Fields order. If an amount is zero, enter zero "0".
Differential Analysis
Reject Order (Alt. 1) or Accept Order (Alt. 2)
February 2, 2014
Reject Order (Alternative 1)
Accept Order (Alternative 2)
Differential Effect on Income (Alternative 2)
Revenues
$
$
$
Costs:
Variable manufacturing costs
Income(loss)
$
$
$
HideHint(s)
a. Prepare a differential analysis on whether to reject (Alternative 1) or accept (Alternative 2) the Fields order. If an amount is zero, enter zero "0".
Differential Analysis
Reject Order (Alt. 1) or Accept Order (Alt. 2)
February 2, 2014
Reject Order (Alternative 1)
Accept Order (Alternative 2)
Differential Effect on Income (Alternative 2)
Revenues
$
$
$
Costs:
Variable manufacturing costs
Income(loss)
$
$
$
Explanation / Answer
Statement showing computations Particulars Reject Order Accept Order Differential Sales Reject= 45,100 * 35 Accept = 45,100*35 + 15,500*29 1,578,500.00 2,028,000.00 449,500.00 Variable Costs Reject = 45,100 * 25 Accept = 60,600*25 1,127,500.00 1,515,000.00 387,500.00 Income 451,000.00 513,000.00 62,000.00
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