Blossom is the creator of Y-Go, a technology that weaves silver into fabrics to kill bacteria and odour on clothing while managing heat. Y-Go has become very popular in undergarments for sports activities. Operating at capacity, the company can produce 1,000,000 Y-Go undergarments each year. The per-unit and total costs for the undergarment are as follows: Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Total (a) Incremental revenue $ Incremental cost: Variable cost Per Undergarment $1.90 0.50 1.15 The Canadian Armed Forces (CAF) has approached Blossom and expressed an interest in purchasing 191,000 Y-Go undergarments for soldiers stationed in extremely warm climates. The CAF would pay the unit cost for direct materials, direct labour, and variable manufacturing overhead costs. In addition, the CAF has agreed to pay an additional $1 per undergarment to cover all other costs and provide a profit. Presently, Blossom is operating at 70% capacity and does not have any other potential buyers for Y-Go. If Blossom accepts the CAF's offer, it will not incur any variable selling expenses for this order. Incremental income 1.20 $ 0.30 Using incremental analysis, determine whether Blossom should accept the CAF's offer. (Round per unit calculations to 2 decimal places, e.g. 15.25 and final answers to 0 decimal places, e.g. 5,275.) $5.05 Total $1,900,000 500,000 1,150,000 1,200,000 300,000 $5,050,000
Blossom is the creator of Y-Go, a technology that weaves silver into fabrics to kill bacteria and odour on clothing while managing heat. Y-Go has become very popular in undergarments for sports activities. Operating at capacity, the company can produce 1,000,000 Y-Go undergarments each year. The per-unit and total costs for the undergarment are as follows: Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Total (a) Incremental revenue $ Incremental cost: Variable cost Per Undergarment $1.90 0.50 1.15 The Canadian Armed Forces (CAF) has approached Blossom and expressed an interest in purchasing 191,000 Y-Go undergarments for soldiers stationed in extremely warm climates. The CAF would pay the unit cost for direct materials, direct labour, and variable manufacturing overhead costs. In addition, the CAF has agreed to pay an additional $1 per undergarment to cover all other costs and provide a profit. Presently, Blossom is operating at 70% capacity and does not have any other potential buyers for Y-Go. If Blossom accepts the CAF's offer, it will not incur any variable selling expenses for this order. Incremental income 1.20 $ 0.30 Using incremental analysis, determine whether Blossom should accept the CAF's offer. (Round per unit calculations to 2 decimal places, e.g. 15.25 and final answers to 0 decimal places, e.g. 5,275.) $5.05 Total $1,900,000 500,000 1,150,000 1,200,000 300,000 $5,050,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please answer this with full and final workings steps explanation computation in text form
Transcribed Image Text:Blossom is the creator of Y-Go, a technology that weaves silver into fabrics to kill bacteria and odour on clothing while managing heat.
Y-Go has become very popular in undergarments for sports activities. Operating at capacity, the company can produce 1,000,000 Y-Go
undergarments each year. The per-unit and total costs for the undergarment are as follows:
Direct materials
Direct labour
Variable manufacturing overhead
Fixed manufacturing overhead
Variable selling expenses
Total
(a)
Incremental revenue
Incremental cost:
Variable cost
Per Undergarment
$1.90
0.50
Incremental income
1.15
$
1.20
0.30
The Canadian Armed Forces (CAF) has approached Blossom and expressed an interest in purchasing 191,000 Y-Go undergarments for
soldiers stationed in extremely warm climates. The CAF would pay the unit cost for direct materials, direct labour, and variable
manufacturing overhead costs. In addition, the CAF has agreed to pay an additional $1 per undergarment to cover all other costs and
provide a profit. Presently, Blossom is operating at 70% capacity and does not have any other potential buyers for Y-Go. If Blossom
accepts the CAF's offer, it will not incur any variable selling expenses for this order.
$5.05
Total
$1,900,000
Using incremental analysis, determine whether Blossom should accept the CAF's offer. (Round per unit calculations to 2 decimal
places, e.g. 15.25 and final answers to O decimal places, e.g. 5,275.)
500,000
1,150,000
1,200,000
300,000
$5,050,000
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