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Pharoah 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 1,083,000 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. Per Undergarment Total Direct materials $2.05 $2,220,150 Direct labor 0.46 498,180 Variable manufacturing overhead 1.03 1,115,490 Fixed manufacturing overhead 1.48 1,602,840 Variable selling expenses 0.33 357,390 Totals $5.35 $5,794,050 The U.S. Army has approached Pharoah Fiber and expressed an interest in purchasing 249,500 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 $1.09 per undergarment to cover all other costs and provide a profit. Presently, Pharoah Fiber is operating at 70% capacity and does not have any other potential buyers for Y-Go. If Pharoah Fiber accepts the Army's offer, it will not incur any variable selling expenses related to this order. Prepare an incremental analysis for the Pharoah Fiber. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Revenues Variable costs: Direct materials Direct labor Variable overhead Total variable costs Net income Reject Order $ $ Should Pharoah Fiber accept the Army's offer? Pharoah Fiber should the Army's offer. $ Accept Order Net Income Increase (Decrease) $ $ $

Pharoah 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 1,083,000 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. Per Undergarment Total Direct materials $2.05 $2,220,150 Direct labor 0.46 498,180 Variable manufacturing overhead 1.03 1,115,490 Fixed manufacturing overhead 1.48 1,602,840 Variable selling expenses 0.33 357,390 Totals $5.35 $5,794,050 The U.S. Army has approached Pharoah Fiber and expressed an interest in purchasing 249,500 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 $1.09 per undergarment to cover all other costs and provide a profit. Presently, Pharoah Fiber is operating at 70% capacity and does not have any other potential buyers for Y-Go. If Pharoah Fiber accepts the Army's offer, it will not incur any variable selling expenses related to this order. Prepare an incremental analysis for the Pharoah Fiber. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Revenues Variable costs: Direct materials Direct labor Variable overhead Total variable costs Net income Reject Order $ $ Should Pharoah Fiber accept the Army's offer? Pharoah Fiber should the Army's offer. $ Accept Order Net Income Increase (Decrease) $ $ $

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints
Section: Chapter Questions
Problem 16E
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Pharoah 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 1,083,000 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. Per Undergarment Total Direct materials $2.05 $2,220,150 Direct labor 0.46 498,180 Variable manufacturing overhead 1.03 1,115,490 Fixed manufacturing overhead 1.48 1,602,840 Variable selling expenses 0.33 357,390 Totals $5.35 $5,794,050 The U.S. Army has approached Pharoah Fiber and expressed an interest in purchasing 249,500 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 $1.09 per undergarment to cover all other costs and provide a profit. Presently, Pharoah Fiber is operating at 70% capacity and does not have any other potential buyers for Y-Go. If Pharoah Fiber accepts the Army's offer, it will not incur any variable selling expenses related to this order. Prepare an incremental analysis for the Pharoah Fiber. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Revenues Variable costs: Direct materials Direct labor Variable overhead Total variable costs Net income Reject Order $ $ Should Pharoah Fiber accept the Army's offer? Pharoah Fiber should the Army's offer. $ Accept Order Net Income Increase (Decrease) $ $ $
Transcribed Image Text:Pharoah 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 1,083,000 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. Per Undergarment Total Direct materials $2.05 $2,220,150 Direct labor 0.46 498,180 Variable manufacturing overhead 1.03 1,115,490 Fixed manufacturing overhead 1.48 1,602,840 Variable selling expenses 0.33 357,390 Totals $5.35 $5,794,050 The U.S. Army has approached Pharoah Fiber and expressed an interest in purchasing 249,500 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 $1.09 per undergarment to cover all other costs and provide a profit. Presently, Pharoah Fiber is operating at 70% capacity and does not have any other potential buyers for Y-Go. If Pharoah Fiber accepts the Army's offer, it will not incur any variable selling expenses related to this order. Prepare an incremental analysis for the Pharoah Fiber. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Revenues Variable costs: Direct materials Direct labor Variable overhead Total variable costs Net income Reject Order $ $ Should Pharoah Fiber accept the Army's offer? Pharoah Fiber should the Army's offer. $ Accept Order Net Income Increase (Decrease) $ $ $
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