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 "0". If required, use a minus sign to indicate a loss. Differential Analysis Reject Order (Alt. 1) or Accept Order (Alt. 2) November 12 RejectOrder(Alternative 1) AcceptOrder(Alternative 2) DifferentialEffects(Alternative 2) Revenues $ $ $ Costs: Variable manufacturing costs Profit (Loss) $ $ $ b. Having unused capacity available is to this decision. The differential revenue is than the differential cost. Thus, accepting this additional business will result in a net . c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places.$
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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 "0". If required, use a minus sign to indicate a loss.
Differential Analysis Reject Order (Alt. 1) or Accept Order (Alt. 2) November 12 Reject
Order
(Alternative 1)Accept
Order
(Alternative 2)Differential
Effects
(Alternative 2)Revenues $ $ $ Costs: Variable manufacturing costs Profit (Loss )$ $ $ b. Having unused capacity available is to this decision. The differential revenue is than the differential cost. Thus, accepting this additional business will result in a net .
c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places.
$
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