Decision on Accepting Additional Business Homestead Jeans Co. has an annual plant capacity of 64,400 units, and current production is 43,100 units. Monthly fixed costs are $39,700, and variable costs are $25 per unit. The present selling price is $36 per unit. On November 12 of the current year, the company received an offer from Dawkins Company for 13,200 units of the product at $26 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 Order (Alternative 1) or Accept Order (Alternative 2). If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Reject Order (Alt. 1) or Accept Order (Alt. 2) November 12 Reject Order (Alternative 1) Accept Order (Alternative 2) Differential Effects (Alternative 2) Revenues $fill in the blank $fill in the blank $fill in the blank Costs: Variable manufacturing costs fill in the blank fill in the blank fill in the blank Profit (loss) $fill in the blank $fill in the blank $fill in the blank b. Having unused capacity available is fill in the blank to this decision. The differential revenue is fill in the blank than the differential cost. Thus, accepting this additional business will result in a net fill in the blank. c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places. $fill in the blank

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Decision on Accepting Additional Business

Homestead Jeans Co. has an annual plant capacity of 64,400 units, and current production is 43,100 units. Monthly fixed costs are $39,700, and variable costs are $25 per unit. The present selling price is $36 per unit. On November 12 of the current year, the company received an offer from Dawkins Company for 13,200 units of the product at $26 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 Order (Alternative 1) or Accept Order (Alternative 2). If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis

Reject Order (Alt. 1) or Accept Order (Alt. 2)

November 12

	Reject Order (Alternative 1)	Accept Order (Alternative 2)	Differential Effects (Alternative 2)
Revenues	$fill in the blank	$fill in the blank	$fill in the blank
Costs:
Variable manufacturing costs	fill in the blank	fill in the blank	fill in the blank
Profit (loss)	$fill in the blank	$fill in the blank	$fill in the blank

b. Having unused capacity available is fill in the blank to this decision. The differential revenue is fill in the blank than the differential cost. Thus, accepting this additional business will result in a net fill in the blank.

c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places.

$fill in the blank

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