provide a profit. Presently, Vaughn is operating at 75% capacity and does not have any other potential buyers for Y-Go. If Vaughn accepts the CAF's offer, it will not incur any variable selling expenses for this order. ادا
provide a profit. Presently, Vaughn is operating at 75% capacity and does not have any other potential buyers for Y-Go. If Vaughn accepts the CAF's offer, it will not incur any variable selling expenses for this order. ادا
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
hh.5
Transcribed Image Text:provide a profit. Presently, Vaughn is operating at 75% capacity and does not have any other potential
buyers for Y-Go. If Vaughn accepts the CAF's offer, it will not incur any variable selling expenses for
this order.
(a)
Your answer is partially correct.
Using incremental analysis, determine whether Vaughn 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.)
Incremental revenue
Incremental cost:
Variable cost
Incremental income
$
LA
1056000
836000
1892000
Transcribed Image Text:Vaughn 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
Per Undergarment
$2.10
0.50
1.00
1.20
0.25
$5.05
Total
$2,100,000
500,000
1,000,000
1,200,000
250,000
$5,050,000
The Canadian Armed Forces (CAF) has approached Vaughn and expressed an interest in purchasing
220,000 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
ddition, the CAF has agreed to pay an additional $1 per undergarment to cover all other costs and
ovide a profit. Presently, Vaughn is operating at 75% capacity and does not have any other potential
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