Product R is normally sold for $51.70 per unit. A special price of $43.50 is off

Question

Product R is normally sold for $51.70 per unit. A special price of $43.50 is offered for the export market. The variable production cost is $35.20 per unit. An additional export tariff of 20% of revenue must be paid for all export products. Assume there is sufficient capaoty for the special order. Required: 1. Prepare a differential anaisia dated October 23 on whether to reject (Alternative 1) or accept (Alternative 2) the special order. Refer to the list of Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter O".A colon (:) will automatically appear if required 2. Should the special order be rejected (Alternative 1) or accepted (Alternative 2)

Explanation / Answer

Reject Accept Differential effect order order on income(alt 2) Revenue 43.5 43.5 costs variable costs 35.2 -35.2 export tariff(43.5*20%) 8.7 -8.7 Net income -0.4 -0.4 Reject the special order

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