Tamarisk 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 $2.00 0.70 1.15 1.05 0.35 $5.25 Total $2,000,000 700,000 1,150,000 1,050,000 350,000 $5,250,000 The Canadian Armed Forces (CAF) has approached Tamarisk and expressed an interest in purchasing 189,000 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, Tamarisk is operating at 65% capacity and does not have any other potential buyers for Y-Go. If Tamarisk accepts the CAF's offer, it will not incur any variable selling expenses for this order.
Tamarisk 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 $2.00 0.70 1.15 1.05 0.35 $5.25 Total $2,000,000 700,000 1,150,000 1,050,000 350,000 $5,250,000 The Canadian Armed Forces (CAF) has approached Tamarisk and expressed an interest in purchasing 189,000 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, Tamarisk is operating at 65% capacity and does not have any other potential buyers for Y-Go. If Tamarisk accepts the CAF's offer, it will not incur any variable selling expenses for this order.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Direct materials
Direct labour
Tamarisk 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:
Variable manufacturing overhead
Fixed manufacturing overhead
Variable selling expenses
Total
Per Undergarment
$2.00
0.70
1.15
1.05
0.35
$5.25
Total
$2,000,000
700,000
1,150,000
1,050,000
350,000
-/15
$5,250,000
!!!
:
The Canadian Armed Forces (CAF) has approached Tamarisk and expressed an interest in purchasing 189,000 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, Tamarisk is operating at 65% capacity and does not have any other potential buyers for Y-Go. If Tamarisk
accepts the CAF's offer, it will not incur any variable selling expenses for this order.
Transcribed Image Text:(a)
Using incremental analysis, determine whether Tamarisk should accept the CAF's offer. (Round per unit calculations to 2 deci
places, e.g. 15.25 and final answers to 0 decimal places, e.g. 5,275.)
Incremental revenue
4
Incremental cost:
Variable cost
Incremental income
Tamarisk should
$
$
✓ the Canadian forces' offer.
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