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. Calculate a differential analysis on whether to accept or reject the special offer.
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. Calculate a differential analysis on whether to accept or reject the special offer.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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.
Calculate a differential analysis on whether to accept or reject the special offer.
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