MZE Manufacturing Company has a normal plant capacity of 37,500 units per month. Because of an extra-large quantity of inventory on hand, it expects to produce only 30,000 units in May. Monthly fixed costs and expenses are $112,500 ($3.00 per unit at normal plant capacity) and variable costs and expenses are $8.25 per unit. The present selling price is $13.50 per unit. The company has an opportunity to sell 7,500 additional units at $9.90 per unit to an exporter who plans to market the product under its own brand name in a foreign market. The additional business is therefore not expected to affect the regular selling price or quantity of sales of MZE Manufacturing Company. Prepare a differential analysis report dated April 21 of the current year. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.
MZE Manufacturing Company has a normal plant capacity of 37,500 units per month. Because of an extra-large quantity of inventory on hand, it expects to produce only 30,000 units in May. Monthly fixed costs and expenses are $112,500 ($3.00 per unit at normal plant capacity) and variable costs and expenses are $8.25 per unit. The present selling price is $13.50 per unit. The company has an opportunity to sell 7,500 additional units at $9.90 per unit to an exporter who plans to market the product under its own brand name in a foreign market. The additional business is therefore not expected to affect the regular selling price or quantity of sales of MZE Manufacturing Company. Prepare a differential analysis report dated April 21 of the current year. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.
Chapter4: Preparing And Using Financial Statements
Section: Chapter Questions
Problem 2EP
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MZE Manufacturing Company has a normal plant capacity of 37,500 units per month. Because of an extra-large quantity of inventory on hand, it expects to
produce only 30,000 units in May. Monthly fixed costs and expenses are $112,500 ($3.00 per unit at normal plant capacity) and variable costs and
expenses are $8.25 per unit. The present selling price is $13.50 per unit. The company has an opportunity to sell 7,500 additional units at $9.90 per unit
to an exporter who plans to market the product under its own brand name in a foreigrn market. The additional business is therefore not expected to affect
the regular selling price or quantity of sales of MZE Manufacturing Company.
Prepare a differential analysis report dated April 21 of the current year. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.
Differential Analysis
Reject Order (Alternative 1) or Accept Order (Alternative 2)
April 21
Differential Effects
(Alternative 2)
Reject Order
Accept Order
(Alternative 1) (Alternative 2)
Revenues
Costs:
Variable manufacturing costs
Profit (loss)
Should MZE reject or accept the special order?
the special order.
MZE should
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