Ask Question
6 July, 10:37

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.

+2
Answers (1)
  1. 6 July, 14:26
    0
    Answer and Explanation:

    The preparation of the differential analysis is presented below:

    Particulars Order rejected (Alternative 1) order accepted (Alternative 2) Differential Effect on Income (Alternative 2)

    Revenues $0 $576,000 $576,000

    ($18,000 * $32)

    Costs

    Variable Manufacturing Costs $0 $522,000 - $522,000

    ($18,000 * $29)

    Income (Loss) $0 $54,000 $54,000

    We simply deduct the variable manufacturing cost from the revenues so that the income or loss could come
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Decision on Accepting Additional Business Homestead Jeans Co. has an annual plant capacity of 65,000 units, and current production is ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers