Decision on Accepting Additional Business Homestead Jeans Co. has an annual plan

Question

Decision on Accepting Additional Business Homestead Jeans Co. has an annual plant capacity of 64,300 units, and current production is 46,300 units. Monthly fixed costs are $40,300, and variable costs are $25 per unit. The present selling price is $37 per unit. On November 12 of the current year, the company received an offer from Dawkins Company for 14,400 units of the product at $28 each. Dawkins 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 Homestead Jeans Co a. Prepare a differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Dawkins order. If an amount is zero, enter zero "O". 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 0 403,200 403,200 V Costs: Variable manufacturing costs 532,800X 532,800X Income (Loss) 40,300 X 40,300 X than the differential cost. Thus, accepting this b. Having unused capacity available is relevant to this decision. The differential revenue is more additional business will result in a net gain c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal place:s

Explanation / Answer

Reject order Accept order Differential effect on income Revenues 403200 403200 Costs: Variable manufacturing costs -360000 -360000 Income (Loss) 43200 43200 c Minimum price = $25.01

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.