Peters Company makes a product that regularly sells for $14.50 per unit. (Click

Question

Peters Company makes a product that regularly sells for $14.50 per unit. (Click the icon to view additional information.) 7.If Peters Company has excess capacity, should it accept the offer from Wismer? Show your calculations. 8.Does your answer change if Peters Company is operating at capacity? Why or why not? r parentheses to show a decrease in operating income.) 7. If Peters Company has excess capacity, should it accept the offer from Wismer? Show your calculations. (Use a minus sign o 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 $6,600 8. Does your answer change if Peters Company is operating at capacity? Why or why not? (Enter an expected decrease in revenue with a minus sign or parentheses.) Revenue at capacity sale price Less: Revenue at regular sale price Expected increase/(decrease) in revenue 46,200 (39,600) 6,600 More Info The product has variable manufacturing costs of $9.00 per unit and fixed manufacturing costs of $2.50 per unit (based on $180,000 total fixed costs at current production of 80,000 units). Therefore, total production cost is $11.50 per unit. Peters Company receives an offer from Wismer Company to purchase 4,400 units for $10.50 each. Selling and administrative costs and future sales will not be affected by the sale, and Peters does not expect any additional fixed costs Print Done

Explanation / Answer

Revenue at capacity sale price 46200 =4400*10.5 Less: Revenue at regular sale price 63800 =4400*14.5 Expected increase(decrease) in revenue -17600 No the offer should not be accpeted as income decreases by $17600

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