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

Question

Decision on Accepting Additional Business

Down Home Jeans Co. has an annual plant capacity of 64,100 units, and current production is 45,200 units. Monthly fixed costs are $41,400, and variable costs are $25 per unit. The present selling price is $34 per unit. On February 2, 2014, the company received an offer from Fields Company for 13,300 units of the product at $26 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) 345800 345800 Costs: Variable manufacturing costs 332500 332500 Income (Loss) 13300 13300

Explanation / Answer

c Minimum price per unit that would yield positive contribution margin = $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.