Blossom Fiber Company is the creator of Y-Go, a technology that weaves silver into its fabrics to kill bacteria and odor on clothing while managing heat. Y-Go has become very popular in undergarments for sports activities. Operating at capacity, the company can produce 1,000,000 Y-Go undergarments a year. The per unit and the total costs for an individual garment when the company operates at full capacity are as follows. Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Totals Per Undergarment $1.90 0.40 0.95 1.40 0.30 $4.95 Total $1,900,000 400,000 950,000 1,400,000 300,000 $4,950,000 The U.S. Army has approached Blossom Fiber and expressed an interest in purchasing 249,000 Y-Go undergarments for soldiers in extremely warm climates. The Army would pay the unit cost for direct materials, direct labor, and variable manufacturing overhead costs. In addition, the Army has agreed to pay an additional $0.95 per undergarment to cover all other costs and provide a profit. Presently, Blossom Fiber is operating at 70% capacity and does not have any other potential buyers for Y-Go. If Blossom Fiber accepts the Army's offer, it will not incur any variable selling expenses related to this order.
Blossom Fiber Company is the creator of Y-Go, a technology that weaves silver into its fabrics to kill bacteria and odor on clothing while managing heat. Y-Go has become very popular in undergarments for sports activities. Operating at capacity, the company can produce 1,000,000 Y-Go undergarments a year. The per unit and the total costs for an individual garment when the company operates at full capacity are as follows. Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Totals Per Undergarment $1.90 0.40 0.95 1.40 0.30 $4.95 Total $1,900,000 400,000 950,000 1,400,000 300,000 $4,950,000 The U.S. Army has approached Blossom Fiber and expressed an interest in purchasing 249,000 Y-Go undergarments for soldiers in extremely warm climates. The Army would pay the unit cost for direct materials, direct labor, and variable manufacturing overhead costs. In addition, the Army has agreed to pay an additional $0.95 per undergarment to cover all other costs and provide a profit. Presently, Blossom Fiber is operating at 70% capacity and does not have any other potential buyers for Y-Go. If Blossom Fiber accepts the Army's offer, it will not incur any variable selling expenses related to this order.
Chapter8: Standard Costs And Variances
Section: Chapter Questions
Problem 2EB: Salley is developing material and labor standards for her company. She finds that it costs $0.55 per...
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Transcribed Image Text:Blossom Fiber Company is the creator of Y-Go, a technology that weaves silver into its fabrics to kill bacteria and odor on clothing
while managing heat. Y-Go has become very popular in undergarments for sports activities. Operating at capacity, the company can
produce 1,000,000 Y-Go undergarments a year. The per unit and the total costs for an individual garment when the company operates
at full capacity are as follows.
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Variable selling expenses
Totals
Per Undergarment
$1.90
0.40
0.95
1.40
0.30
$4.95
Total
$1,900,000
400,000
950,000
1,400,000
300,000
$4,950,000
The U.S. Army has approached Blossom Fiber and expressed an interest in purchasing 249,000 Y-Go undergarments for soldiers in
extremely warm climates. The Army would pay the unit cost for direct materials, direct labor, and variable manufacturing overhead
costs. In addition, the Army has agreed to pay an additional $0.95 per undergarment to cover all other costs and provide a profit.
Presently, Blossom Fiber is operating at 70% capacity and does not have any other potential buyers for Y-Go. If Blossom Fiber accepts
the Army's offer, it will not incur any variable selling expenses related to this order.
Transcribed Image Text:Prepare an incremental analysis for the Blossom Fiber. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or
parentheses e.g. (45).)
Revenues
Variable costs:
Direct materials
Direct labor
Variable overhead
Total variable costs
Net income
+A
Blossom Fiber should
$
$
Reject
Order
Should Blossom Fiber accept the Army's offer?
the Army's offer.
LA
LA
Accept
Order
LA
LA
Net Income
Increase
(Decrease)
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