Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Chapter 11, Problem 13E
a)
To determine
Prepare the differential analysis of Company HJ on November 12, to decide whether to accept or reject the proposal.
b)
To determine
Explain the effect of accepting the additional business on the operating income.
c)
To determine
Ascertain the minimum price which would generate a positive cotribution margin.
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Decision on accepting additional businessHomestead Jeans Co. has an annual plant capacity of 65.000 units, andcurrent production is 45,000 units. Monthly fixed costs are $54,000, andvariable 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 fromDawkins Company for 18,000 units of the product at $32 each. DawkinsCompany will market the units in a foreign country under its own brandname. The additional business is not expected to affect the domesticselling price or quantity of sales of Homestead Jeans Co.
a. Prepare a differential analysis dated November 12 on whether to reject(Alternative 1) or accept (Alternative 2) the Dawkins order.b. Briefly explain why accepting this additional business will increase operating income.c. What is the minimum price per unit that would produce a positivecontribution margin?
Decision on Accepting Additional Business
Homestead Jeans Co. has an annual plant capacity of 64,400 units, and current production is 43,100 units. Monthly fixed costs are $39,700, and variable costs are $25 per unit. The present selling price is $36 per unit. On November 12 of the current year, the company received an offer from Dawkins Company for 13,200 units of the product at $26 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.
a. Prepare a differential analysis dated November 12 on whether to Reject Order (Alternative 1) or Accept Order (Alternative 2). If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.
Differential Analysis
Reject Order (Alt. 1) or Accept Order (Alt. 2)
November 12
RejectOrder(Alternative 1)
AcceptOrder(Alternative 2)…
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.
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.
Differential Analysis
Reject Order (Alt. 1) or Accept Order (Alt. 2)
November 12
Аcсept
Order
Reject
Differential
Order
Effects
(Alternative 1) (Alternative 2) (Alternative 2)…
Chapter 11 Solutions
Managerial Accounting
Ch. 11 - Explain the meaning of (A) differential revenue,...Ch. 11 - A company could sell a building for 250,000 or...Ch. 11 - A chemical company has a commodity-grade and...Ch. 11 - A company accepts incremental business at a...Ch. 11 - Prob. 5DQCh. 11 - Prob. 6DQCh. 11 - Prob. 7DQCh. 11 - Although the cost-plus approach to product pricing...Ch. 11 - How does the target cost method differ from...Ch. 11 - Prob. 10DQ
Ch. 11 - Lease or sell Plymouth Company owns equipment with...Ch. 11 - Prob. 2BECh. 11 - Make or buy A company manufactures various-sized...Ch. 11 - Replace equipment A machine with a book value of...Ch. 11 - Prob. 5BECh. 11 - Prob. 6BECh. 11 - Prob. 7BECh. 11 - Prob. 8BECh. 11 - Differential analysis for a lease or sell decision...Ch. 11 - Prob. 2ECh. 11 - Differential analysis for a discontinued product A...Ch. 11 - Differential analysis for a discontinued product...Ch. 11 - Prob. 5ECh. 11 - Prob. 6ECh. 11 - Make-or-buy decision Somerset Computer Company has...Ch. 11 - Prob. 8ECh. 11 - Machine replacement decision A company is...Ch. 11 - Differential analysis for machine replacement...Ch. 11 - Sell or process further Calgary Lumber Company...Ch. 11 - Sell or process further Dakota Coffee Company...Ch. 11 - Prob. 13ECh. 11 - Accepting business at a special price Box Elder...Ch. 11 - Prob. 15ECh. 11 - Prob. 16ECh. 11 - Product cost method of product costing Smart...Ch. 11 - Target costing Toyota Motor Corporation (TM) uses...Ch. 11 - Prob. 19ECh. 11 - Prob. 20ECh. 11 - Prob. 21ECh. 11 - Total cost method of product pricing Based on the...Ch. 11 - Variable cost method of product pricing Based on...Ch. 11 - Differential analysis involving opportunity costs...Ch. 11 - Differential analysis for machine replacement...Ch. 11 - Differential analysis for sales promotion proposal...Ch. 11 - Prob. 4PACh. 11 - Product pricing and profit analysis with...Ch. 11 - Product pricing using the cost-plus approach...Ch. 11 - Prob. 1PBCh. 11 - Differential analysis for machine replacement...Ch. 11 - Prob. 3PBCh. 11 - Prob. 4PBCh. 11 - Prob. 5PBCh. 11 - Prob. 6PBCh. 11 - Analyze Pacific Airways Pacific Airways provides...Ch. 11 - Service yield pricing and differential equations...Ch. 11 - Prob. 3MADCh. 11 - Prob. 4MADCh. 11 - Aaron McKinney is a cost accountant for Majik...Ch. 11 - Prob. 3TIFCh. 11 - Decision on accepting additional business A...Ch. 11 - Accepting service business at a special price If...Ch. 11 - Identifying product cost distortion Peachtree...Ch. 11 - Prob. 1CMACh. 11 - Prob. 2CMACh. 11 - Aril Industries is a multiproduct company that...Ch. 11 - Oakes Inc. manufactured 40,000 gallons of Mononate...
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