aterials bor overhead lable costs Order Order (Decrease)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:3
Prepare an incremental analysis for the Carla Vista Fiber. (Enter negative amounts using either a negative sign preceding the number eg. 45
or parentheses eg. (45))
Revenues
Variable costs
Direct materials
Direct labor
Variable overhead
Total variable costs
Net income
Reject
Order
Should Caria Vista Fiber accept the Army's offer?
Carla Vista Fiber should
the Army's offer.
Accept
Order
Net Income
Increase
(Decrease)
SUPPOR
Transcribed Image Text:G
Carla Vista Fiber Company is the creator of Y-Go, a technology that weaves silver into its fabrics to kill bacteria and odor on clothing
while managing heat. Y-Go has become very popular in undergarments for sports activities. Operating at capacity, the company can
produce 1,047,000 Y-Go undergarments a year. The per unit and the total costs for an individual garment when the company operates
at full capacity are as follows
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Variable selling expenses
Totals
Per Undergarment
$1.91
0.45
107
1.59
0,33
$5.35
Total
$1.999,770
471,150
1.120.290
1,664,730
345.510
$5,601,450
The US Army has approached Carla Vista Fiber and expressed an interest in purchasing 250,700 Y-Go undergarments for soldiers in
extremely warm climates. The Army would pay the unit cost for direct materials, direct labor, and variable manufacturing overhead
costs. In addition, the Army has agreed to pay an additional $1.02 per undergarment to cover all other costs and provide a profit
Presently, Carla Vista Fiber is operating at 70% capacity and does not have any other potential buyers for Y-Go, If Carla Vista Fiber
accepts the Army's affer, it will not incur any variable selling expenses related to this order
Prepare an incremental analysis for the Carta Vista Fiber, (Enter negative amounts using either a negative sign preceding the number -45
or parentheses (45))
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