1. A business received an offer from an exporter for 28,040 units of product at

Question

1.

A business received an offer from an exporter for 28,040 units of product at $18.00 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available:

Determine the differential cost from the acceptance of the offer.

Select the correct answer.

$140,200.00

2.

Win Co. can further process Product J to produce Product D. Product J is currently selling for $22.00 per pound and costs $15.00 per pound to produce. Product D would sell for $45.00 per pound and would require an additional cost of $12.00 per pound to produce.

Determine the differential revenue of producing Product D.

Select the correct answer.

$45.00 per pound

3.

Assume that Win Co. is considering disposing of equipment that cost $59,395.00 and has $41,576.50 of accumulated depreciation to date. Win Co. can sell the equipment through a broker for $31,990.00 less 8% commission. Alternatively, But Co. has offered to lease the equipment for five years for a total of $47,994.00. Win will incur repair, insurance, and property tax expenses estimated at $11,658.00. At lease-end, the equipment is expected to have no residual value. Determine the net differential income from the lease alternative.

Select the correct answer.

Explanation / Answer

Dear student, only one question is allowed at a time. I am answering the first question

1)

Since the acceptance of new offer will not affect the regular production and sales, Fixed costs are not relevant as the new order will not increase the fixed costs as these costs are sunk costs which need to be incurred even if new offer was not accepted. Only variable costs will be affected by the new order as variable costs need to be incurred for the new order

So, relevant costs

= Total variable costs

= Quantity x Variable cost per unit

= 28,040 x $13

= $ 364,520

So, option C is the correct option

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