variable costs are $29 per unit. The present selling price is $42 per unit. On November 12 of the current year, the company received an offer from Dawkins Company for 18,000 units of the product at $32 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. Question Content Area
Decision on Accepting Additional Business
Homestead Jeans Co. has an annual plant capacity of 65,000 units, and current production is 45,000 units. Monthly fixed costs are $54,000, and variable costs are $29 per unit. The present selling price is $42 per unit. On November 12 of the current year, the company received an offer from Dawkins Company for 18,000 units of the product at $32 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.
Question Content Area
a. Prepare a differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Dawkins order. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.
| Reject Order (Alternative 1) |
Accept Order (Alternative 2) |
Differential Effects (Alternative 2) |
|
| Revenues | $fill in the blank a36079f9706bfb6_1 | $fill in the blank a36079f9706bfb6_2 | $fill in the blank a36079f9706bfb6_3 |
| Costs: | |||
| Variable manufacturing costs | fill in the blank a36079f9706bfb6_4 | fill in the blank a36079f9706bfb6_5 | fill in the blank a36079f9706bfb6_6 |
| $fill in the blank a36079f9706bfb6_7 | $fill in the blank a36079f9706bfb6_8 | $fill in the blank a36079f9706bfb6_9 |
Question Content Area
b. Having unused capacity available is revelant/irrevlant to this decision. The differential revenue is more/less than the differential cost. Thus, accepting this additional business will result in a net profit/loss.
.
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 7142a7085030fb5_4
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