Question
Decision on Accepting Additional Business
Down Home Jeans Co. has an annual plant capacity of 63,500 units, and current production is 43,600 units. Monthly fixed costs are $41,100, and variable costs are $25 per
unit. The present selling price is $35 per unit. On November 12 of the current year, the company received an offer from Fields Company for 14,300 units of the product at $27
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 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
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
Differential
Effect
Reject
Order
(Alternative 1) (Alternative 2)
Accept
Order
on Income
(Alternative 2)
Revenues
Costs:
Variable manufacturing costs
Income (Loss)
to this decision. The differential revenue is
than the differential cost. Thus, accepting this
b. Having unused capacity available is
additional business will result in a net
relevant
ce a positive contribution margin? Round your answer to two decimal places.
c. What is the minimum price per unit that
irrelevant
expand button
Transcribed Image Text:Decision on Accepting Additional Business Down Home Jeans Co. has an annual plant capacity of 63,500 units, and current production is 43,600 units. Monthly fixed costs are $41,100, and variable costs are $25 per unit. The present selling price is $35 per unit. On November 12 of the current year, the company received an offer from Fields Company for 14,300 units of the product at $27 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 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 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 Differential Effect Reject Order (Alternative 1) (Alternative 2) Accept Order on Income (Alternative 2) Revenues Costs: Variable manufacturing costs Income (Loss) to this decision. The differential revenue is than the differential cost. Thus, accepting this b. Having unused capacity available is additional business will result in a net relevant ce a positive contribution margin? Round your answer to two decimal places. c. What is the minimum price per unit that irrelevant
Expert Solution

Want to see the full answer?

Check out a sample Q&A here
Blurred answer
Students who’ve seen this question also like:
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
Not helpful? See similar books
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Financial Statements And Business Decisions. 1Q
marketing sidebar icon
Want to see this answer and more?
Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*
*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.

Related Accounting Q&A

Find answers to questions asked by students like you.

Q: Decision on Accepting Additional Business Homestead Jeans Co. has an annual plant capacity of…

A: Solution a:

Q: Decision on Accepting Additional Business Homestead Jeans Co. has an annual plant capacity of 65,000…

A: a. Prepare a differential analysis dated November 12 to reject or accept the order as shown below:

Q: Decision on Accepting Additional Business Homestead Jeans Co. has an annual plant capacity of 65,000…

A: Hello, I am only answering first question as per the policy and if you want other to be answered…

Q: Decision on accepting additional businessHomestead Jeans Co. has an annual plant capacity of 65.000…

A: In case of choosing between two alternatives, total costs and revenues are compared for both the…

Q: Decision on accepting additional business Homestead Jeans Co. has an annual plant capacity of 65.000…

A: Annual plant capacit = 65,000 Current production = 45,000  Fixed cost = $54,000 Vaiable cost = $29…

Q: Decision on Accepting Additional Business Country Jeans Co. has an annual plant capacity of 66,100…

A: A ) Differential Analysis:

Q: Decision on Accepting Additional Business Country Jeans Co. has an annual plant capacity of 66,800…

A: Differential Analysis: Differential analysis refers to the analysis of differential revenue that…

Q: Decision on Accepting Additional Business Country Jeans Co. has an annual plant capacity of 64,300…

A: SOLUTION-A                                               COUNTRY JEANS CO…

Q: HI give me instruction on how to do please Decision on Accepting Additional Business Homestead…

A: a)

Q: Decision on Accepting Additional Business Miramar Tire and Rubber Company has capacity to produce…

A: Solution: Introduction: The given question is based on the relevant costs on whether accept the…

Q: Decision on Accepting Additional Business Miramar Tire and Rubber Company has capacity to produce…

A: Differential analysis (also called incremental analysis) is a management accounting technique in…

Q: Sell or Process Further Bunyon Lumber Company incurs a cost of $378 per hundred board feet (hbf) in…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Decision on Accepting Additional Business Brightstone Tire and Rubber Company has capacity to…

A: Calculation of Variable selling and admin expenses: [28000 x ( 18 x 40 % ) - ( 89 x 5 % )] = 28000 x…

Q: Healthy Plants Ltd. (HP) produces its premium plantfood in 50-pound bags. Demand for the product is…

A: A maximum stock level seems to be the highest amount of inventory that must not be surpassed within…

Q: 1. In 2021 ABC company will produce 2,700 units of the product. Each unit of product requires 4 kg…

A: The question is related to Inventory Management. The Economic Order Quantity is that level of…

Q: Accepting Business at a Special Price Forever Ready Company expects to operate at 90% of productive…

A: Here in this question, we are require to calculate unit cost below which company should not bid.…

Q: (Whether to explore or not the foreign market). A company annually manufactures 10,000 units of a…

A: Click to see the answer

Q: Decision on Accepting Additional Business Brightstone Tire and Rubber Company has capacity to…

A: In accepting or rejecting the special order which is under our production capacity we consider only…

Q: A company that manufactures and sells one single product is currently operating at 85% of full…

A: Operating full capacity = Currently no. of units producing / % capacity operating = 102000 units /…

Q: Relay Corporation manufactures batons. Relay can manufacture 300,000 batons a year at a variable…

A: Variable cost per unit = Total Variable cost / No. of units = $750,000 / 300,000  = $2.50 per unit

Q: Item X is a standard item stocked in a company’s inventory of spare parts. Each year, the firm uses…

A: Step 1 Economic order quantity (EOQ) is the ideal order quantity a company should purchase to…

Q: A plastic manufacturing company that makes four major products seeks to expand its operations in the…

A: Note: I am solving the first three subparts. Please repost the remaining subparts separately The…

Q: A plastic manufacturing company that makes four major products seeks to expand its operations in the…

A: Sometimes a company needs to select a operating machine from the various option available to it. The…

Q: XXX Company stocks part AA at its warehouse for supplying field service offices. The yearly demand…

A: Click to see the answer

Q: XXX Company stocks part AA at its warehouse for supplying field service offices. The yearly demand…

A: The question is based on the concept of inventory control and management by use of economic order…

Q: Accepting Business at a Special Price Forever Ready Company expects to operate at 82% of productive…

A: If 27,880 batteries is at 82% of Production capacity, then 100% Production capacity will be 34,000…

Q: The Wallace Stationary Company purchases paper fromthe Seaboard Paper Company. Wallace produces…

A: Given information: Demand is 1,415,000 Cost per order is $2,200 Holding cost per order is $0.08

Q: Chen's Chemicals, a firm that produces industrial chemicals, uses 26,000 gallons of a particular…

A: Click to see the answer

Q: Special-Order Decision Smooth Move Company manufactures professional paperweights and has been…

A: 1. Outline the alternatives available for SM Company: SM company normally produces the paper weights…

Q: Sebastian Company produced and sold 50,000 units of product and is operating at 70% of plant…

A: Cost accounting system is a framework that guides the firm to calculate their cost and helps in…

Q: Angel Company expects to sell 500,000 units in 2021 at P50 per unit. Variable manufacturing costs in…

A: Relevant cost per unit for special order = Variable manufacturing costs per unit + overtime pay per…

Q: Angel Company expects to sell 500,000 units in 2021 at P50 per unit. Variable manufacturing costs in…

A: Variable cost means the cost which vary with the level of output where as fixed cost remain fixed…

Q: Vale Corporation sells Product 'MAGNETITE' and Product 'HEMATITE', the sales of both products are…

A: Click to see the answer

Q: Raveen Products sells camping equipment. One of the company’s products, a camp lantern, sells for…

A: Break even point means a point where firm is neither earning profit nor incurring any loss. For…

Q: Spring Manufacturing sold 610,000 units of its product for $98 per unit in 2019. Variable cost per…

A: Contribution margin = Sales - Variable costs Operating income = Contribution margin  - Fixed costs

Q: An auto parts supplier sells Hardy-brand batteries to car dealers and auto mechanics. The annual…

A: Given information : Annual demand (D) : 1,200 batteries Item cost (S) : $20 Holding cost (H) : $8.4…

Q: The Metropolitan Book Company purchases paper from the Atlantic Paper Company. Metropolitan produces…

A: Since we answer up to 3 subparts, we will answer the first three. Please resubmit the question and…

Q: After several years producing and selling at a capacity of 50,000 units, Milton Company faced a year…

A: Variable cost means the cost which vary with the level of output where as fixed cost remain fixed…

Q: Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all…

A: SOLUTION-   WORKING NOTE- SEPARATION OF SEMI VARIABLE COST USING HIGH LOW METHOD. VARIABLE INDIRECT…

Q: Snipe Company has been purchasing a component, Part Q, for $19.20 per unit. Snipe is currently…

A: Differential analysis identifies the revenues and cost that differs between different alternatives.…

Q: Snipe Company has been purchasing a component, Part Q, for $19.20 per unit. Snipe is currently…

A: Click to see the answer

Q: Pisces Company manufactures sonars for fishing boats. Model 100 sells for $400. Pisces produces and…

A: Step 1 Incremental operating income is the income which derived by the Producing  the additional…

Q: GEM Ltd leases a photocopy machine with terms that include a fixed fee each month plus a charge for…

A: The high-low method evaluates overall costs at each activity level, starting with the highest and…

Q: Sage Company is operating at 90% of capacity and is currently purchasing a part used in its…

A: Sage company is operating at 90% of capacity Currently, a part is purchasing which is used in…

Q: Han Products manufactures 30,000 units of part S-6 each year for use on its production line. At this…

A: a. Compute per unit and total relevant cost for buying and making the product as shown below:…

Q: Lucid Images Ltd manufactures premium high definition televisions. The firm’s fixed costs are…

A: Break even point in units = Fixed costs / Contribution margin per unit Where,…

Q: An automobile company needs to decide of outsourcing shafts or producing shafts in the company. If…

A: An automobile needs to decide of outsourcing or producing shafts in the company. Outsourcing shafts…

Q: Item X is a standard item stocked in a company's inventory of spare parts. Each year, the firm uses…

A: In inventory management, economic order quantity (EOQ) is a concept that determines the optimal…

Q: Markham Farms reports the following contribution margin income statement data for the month of…

A: Variable cost means the cost which vary with the level of output and fixed cost means the cost which…

Q: Sky High Seats manufactures seats for airplanes. The company has the capacity to produce​ 100,000…

A: Affect on operating income shall be seen by analyzing if the special order will either generate…

Knowledge Booster
Recommended textbooks for you
  • FINANCIAL ACCOUNTING
    Accounting
    ISBN:9781259964947
    Author:Libby
    Publisher:MCG
    Accounting
    Accounting
    ISBN:9781337272094
    Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
    Publisher:Cengage Learning,
    Accounting Information Systems
    Accounting
    ISBN:9781337619202
    Author:Hall, James A.
    Publisher:Cengage Learning,
  • Horngren's Cost Accounting: A Managerial Emphasis...
    Accounting
    ISBN:9780134475585
    Author:Srikant M. Datar, Madhav V. Rajan
    Publisher:PEARSON
    Intermediate Accounting
    Accounting
    ISBN:9781259722660
    Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
    Publisher:McGraw-Hill Education
    Financial and Managerial Accounting
    Accounting
    ISBN:9781259726705
    Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
    Publisher:McGraw-Hill Education
  • FINANCIAL ACCOUNTING
    Accounting
    ISBN:9781259964947
    Author:Libby
    Publisher:MCG
    Accounting
    Accounting
    ISBN:9781337272094
    Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
    Publisher:Cengage Learning,
    Accounting Information Systems
    Accounting
    ISBN:9781337619202
    Author:Hall, James A.
    Publisher:Cengage Learning,
    Horngren's Cost Accounting: A Managerial Emphasis...
    Accounting
    ISBN:9780134475585
    Author:Srikant M. Datar, Madhav V. Rajan
    Publisher:PEARSON
    Intermediate Accounting
    Accounting
    ISBN:9781259722660
    Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
    Publisher:McGraw-Hill Education
    Financial and Managerial Accounting
    Accounting
    ISBN:9781259726705
    Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
    Publisher:McGraw-Hill Education