Decision on Accepting Additional Business Western Jeans Co. has an annual plant capacity of 2,000,000 units, and current production is 1,920,000 units. Monthly fixed costs are $400,000, and variable costs are $9 per unit. The
Decision on Accepting Additional Business Western Jeans Co. has an annual plant capacity of 2,000,000 units, and current production is 1,920,000 units. Monthly fixed costs are $400,000, and variable costs are $9 per unit. The
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please provide answer in text (Without image)
![Decision on Accepting Additional Business
Western Jeans Co. has an annual plant capacity of 2,000,000
units, and current production is 1,920,000 units. Monthly fixed
costs are $400,000, and variable costs are $9 per unit. The
present selling price is $15 per unit. On July 6 of the current
year, the company received an offer from Childs Company for
50,000 units of the product at $13 each. Childs 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 Western Jeans
Co.
a. Prepare a differential analysis dated July 6 on whether to
reject (Alternative 1) or accept (Alternative 2) the Childs order.
If an amount is zero, enter "0". If required, use a minus sign to
indicate a loss.
Line Item Description
Revenues
Costs:
Differential Analysis
Reject (Alt. 1) or Accept (Alt. 2) Order
July 6
Variable manufacturing costs
Profit (loss)
Reject Order Accept Order Differential Effects
(Alternative 1) (Alternative 2) (Alternative 2)
b. Having unused capacity available is
decision. The differential revenue is
than the
differential cost. Thus, accepting this additional business will
result in a net
to this
c. What is the minimum price per unit that would produce a
positive contribution margin? Round your answer to two
decimal places.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F751eefad-94aa-4662-b76b-aea464c52065%2F03e74f3a-3020-4cd7-b3a1-7843f3f63d53%2Ftcywez_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Decision on Accepting Additional Business
Western Jeans Co. has an annual plant capacity of 2,000,000
units, and current production is 1,920,000 units. Monthly fixed
costs are $400,000, and variable costs are $9 per unit. The
present selling price is $15 per unit. On July 6 of the current
year, the company received an offer from Childs Company for
50,000 units of the product at $13 each. Childs 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 Western Jeans
Co.
a. Prepare a differential analysis dated July 6 on whether to
reject (Alternative 1) or accept (Alternative 2) the Childs order.
If an amount is zero, enter "0". If required, use a minus sign to
indicate a loss.
Line Item Description
Revenues
Costs:
Differential Analysis
Reject (Alt. 1) or Accept (Alt. 2) Order
July 6
Variable manufacturing costs
Profit (loss)
Reject Order Accept Order Differential Effects
(Alternative 1) (Alternative 2) (Alternative 2)
b. Having unused capacity available is
decision. The differential revenue is
than the
differential cost. Thus, accepting this additional business will
result in a net
to this
c. What is the minimum price per unit that would produce a
positive contribution margin? Round your answer to two
decimal places.
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![Horngren's Cost Accounting: A Managerial Emphasis…](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
![Intermediate Accounting](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
![Financial and Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education