Decision on Accepting Additional BusinessHomestead Jeans Co. has an annual plant capacity of 65,000 units, and current production is 45,000 units. Monthly fixed costs are $54,000, and variable costs are $29 per unit. The present selling price is $42 per unit. On November 12 of the current year, the company received an offerfrom Dawkins Company for 18,000 units of the product at $32 each. Dawkins 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 Homestead Jeans Co.a. Prepare a differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Dawkins 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 AnalysisReject Order (Alt. 1) or Accept Order (Alt. 2)November 12DifferentialRejectАссеptEffectOrderOrderon Income(Alternative 2)(Alternative 1) (Alternative 2)Revenues%24Costs:Variable manufacturing costsIncome (Loss)FeedbackCheck My Workb. Having unused capacity available is relevant vto this decision. The differential revenue is morethan the differential cost. Thus, accepting this additional business will result in a net gain vc. What is the minimum price per unit that would produce a posítive contribution margin? Round your answer to two decimal places.Feedback Make-or-Buy DecisionDiamond Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $59 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 40% of direct labor cost. The fully absorbedunit costs to produce comparable carrying cases are expected to be as follows:Direct materials$35.00Direct labor18.00Factory overhead (40% of direct labor)7.20Total cost per unit$60.20If Diamond Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 15% of the direct labor costs.a. Prepare a differential analysis dated February 24 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. If an amount is zero, enter "0". If required, round your answers to two decimal places. For those boxes in which you must entersubtracted or negative numbers use a minus sign.Differential AnalysisMake Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2)February 24Differential EffectMake CarryingBuy CarryingCase (Alternative 1) Case (Alternative 2)on Costs(Alternative 2)Sales PriceCosts:Purchase priceDirect materials per unitDirect labor per unitVariable factory overhead per unitFixed factory overhead per unitIncome (Loss)

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Decision on Accepting Additional Business Homestead Jeans Co. has an annual plant capacity of 65,000 units, and current production is 45,000 units. Monthly fixed costs are $54,000, and variable costs are $29 per unit. The present selling price is $42 per unit. On November 12 of the current year, the company received an offer from Dawkins Company for 18,000 units of the product at $32 each. Dawkins 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 Homestead Jeans Co. a. Prepare a differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Dawkins 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 Reject Accept Effect Order Order on Income (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs: Variable manufacturing costs Income (Loss) Feedback Check My Work b. Having unused capacity available is relevant v to this decision. The differential revenue is more v than the differential cost. Thus, accepting this additional business will result in a net gain v c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places. Feedback

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 13E

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Transcribed Image Text:Decision on Accepting Additional Business Homestead Jeans Co. has an annual plant capacity of 65,000 units, and current production is 45,000 units. Monthly fixed costs are $54,000, and variable costs are $29 per unit. The present selling price is $42 per unit. On November 12 of the current year, the company received an offer from Dawkins Company for 18,000 units of the product at $32 each. Dawkins 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 Homestead Jeans Co. a. Prepare a differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Dawkins 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 Reject Ассеpt Effect Order Order on Income (Alternative 2) (Alternative 1) (Alternative 2) Revenues %24 Costs: Variable manufacturing costs Income (Loss) Feedback Check My Work b. Having unused capacity available is relevant v to this decision. The differential revenue is more than the differential cost. Thus, accepting this additional business will result in a net gain v c. What is the minimum price per unit that would produce a posítive contribution margin? Round your answer to two decimal places. Feedback

Make-or-Buy Decision
Diamond Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $59 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 40% of direct labor cost. The fully absorbed
unit costs to produce comparable carrying cases are expected to be as follows:
Direct materials
$35.00
Direct labor
18.00
Factory overhead (40% of direct labor)
7.20
Total cost per unit
$60.20
If Diamond Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 15% of the direct labor costs.
a. Prepare a differential analysis dated February 24 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. If an amount is zero, enter "0". If required, round your answers to two decimal places. For those boxes in which you must enter
subtracted or negative numbers use a minus sign.
Differential Analysis
Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2)
February 24
Differential Effect
Make Carrying
Buy Carrying
Case (Alternative 1) Case (Alternative 2)
on Costs
(Alternative 2)
Sales Price
Costs:
Purchase price
Direct materials per unit
Direct labor per unit
Variable factory overhead per unit
Fixed factory overhead per unit
Income (Loss)

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