Decision on Accepting Additional Business Down Home Jeans Co.has an annual plant capacity of 63,200 units, and currentproduction is 45,300 units. Monthly fixed costs are $38,800, andvariable costs are $25 per unit. The present selling price is $38per unit. On November 12 of the current year, the company receivedan offer from Fields Company for 16,800 units of the product at $29each. Fields Company will market the units in a foreign countryunder its own brand name. The additional business is not expectedto affect the domestic selling price or quantity of sales of DownHome Jeans Co. a.
Prepare a differential analysis dated November 12
on whether to reject (Alternative 1) or accept (Alternative 2)the Fields order. If an amount is zero, enter zero "0". For thoseboxes in which you must enter subtracted or negative numbers use aminus sign. Differential Analysis Reject Order (Alt. 1) or AcceptOrder (Alt. 2) November 12 Reject Order (Alternative 1) AcceptOrder (Alternative 2) Differential Effect on Income (Alternative2)
Revenues $ $ $ Costs:
Variable manufacturing costs
Income (Loss) $ $ $
b. Having unused capacity available is to this decision. Thedifferential revenue is than the differential cost. Thus, acceptingthis additional business will result in a net . c. What is theminimum price per unit that would produce a positive contributionmargin? Round your answer to two decimal places. $
Decision on Accepting Additional Business Down Home Jeans Co.has an annual plant capacity of 63,200 units, and currentproduction is 45,300 units. Monthly fixed costs are $38,800, andvariable costs are $25 per unit. The present selling price is $38per unit. On November 12 of the current year, the company receivedan offer from Fields Company for 16,800 units of the product at $29each. Fields Company will market the units in a foreign countryunder its own brand name. The additional business is not expectedto affect the domestic selling price or quantity of sales of DownHome Jeans Co. a.
Prepare a differential analysis dated November 12
on whether to reject (Alternative 1) or accept (Alternative 2)the Fields order. If an amount is zero, enter zero "0". For thoseboxes in which you must enter subtracted or negative numbers use aminus sign. Differential Analysis Reject Order (Alt. 1) or AcceptOrder (Alt. 2) November 12 Reject Order (Alternative 1) AcceptOrder (Alternative 2) Differential Effect on Income (Alternative2)
Revenues $ $ $ Costs:
Variable manufacturing costs
Income (Loss) $ $ $
b. Having unused capacity available is to this decision. Thedifferential revenue is than the differential cost. Thus, acceptingthis additional business will result in a net . c. What is theminimum price per unit that would produce a positive contributionmargin? Round your answer to two decimal places. $
Related questions
Kankakee Cosmetics Company is planning a one-month campaign for December to promote sales of one of its two cosmetics products. A total of $150,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign:
| 1 | Moisturizer | Perfume | |
| 2 | Unit selling price | $35.00 | $55.00 |
| 3 | Unit production costs: | ||
| 4 | Direct materials | $12.00 | $20.00 |
| 5 | Direct labor | 8.00 | 10.00 |
| 6 | Variable factory overhead | 3.00 | 6.00 |
| 7 | Fixed factory overhead | 2.00 | 6.00 |
| 8 | Total unit production costs | $25.00 | $42.00 |
| 9 | Unit variable selling expenses | 2.00 | 3.00 |
| 10 | Unit fixed selling expenses | 2.00 | 8.00 |
| 11 | Total unit costs | $29.00 | $53.00 |
| 12 | Operating income per unit | $6.00 | $2.00 |
No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 40,000 additional units of moisturizer or 30,000 additional units of perfume could be sold from the campaign without changing the unit selling price of either product.
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| 1. | Prepare a differential analysis as of November 2 to determine whether to promote moisturizer (Alternative 1) or perfume (Alternative 2). Refer to the lists of Labels and 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 "0". A colon (:) will automatically appear if required. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2. | Determine whether to promote moisturizer (Alternative 1) or promote perfume (Alternative 2). | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3. | The sales manager had tentatively decided to promote moisturizer estimating that operating income would be increased by $50,000 ($5 operating income per unit for 40,000 units, less promotion expenses of $150,000). The manager also believed that the selection of perfume would reduce operating income by $90,000 ($2 operating income per unit for 30,000 units, less promotion expenses of $150,000). State briefly your reasons for supporting or opposing the tentative decision. 1. Prepare a differential analysis as of November 2 to determine whether to promote moisturizer (Alternative 1) or perfume (Alternative 2). Refer to the lists of Labels and 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 "0". A colon (:) will automatically appear if required.
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