how do i show work to get the answers marked in red. thanks! 23 128 (lal to Pete

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how do i show work to get the answers marked in red.
thanks!

23 128 (lal to Peters Company makes a product that regularly sells for $15.50 per unit. 1(Click the icon to view additional information.) 7. If Peters Company has excess capacity, should it accept the offer from Holden? Show your calculations 8. Does your answer change if Peters Company is operating at capacity? Why or why not? $ 48,300 Expected increase in revenue Expected increase in variable manufacturing costs Expected increase/(decrease) in operating income Peters should accept the offer because operating income will increase by $11,500. 8. Does your answer change if Peters Company is operating at capacity? Why or why not? (Enter an expected decrease in revenue with a mi 11,500 parentheses.) Revenue at capacity sale price Less: Revenue at regular sale price Expected increase/(decrease) in revenue Click to select your answers) and then click Check Answer. 48,300 71,300 arts showing Clear All

Explanation / Answer

Expected Revenue from offer of Holden (4600*10.50) = $ 48300

Expected Cost to be incurred for this offer (4600*8) = $ 36800

Benefit from this offer if company has spare capacity = $ 11500

In this case offer should be accepted.

If Company working at their operating capacity ( No Spare Capacity)

Expected Revenue (4600*10.50) = $48300

Regular Revenue (4600*15.50) = $71300

Loss if we accept the offer (48300 - 71300) = $ 23000

In other words, It is like an opportuinity cost i.e. (15.50-10.50)*4600 = $23000

If Company does not have spare capacity then offer should be rejected because If company accept this offer then Company will suffer a loss of $23000.

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