Country Jeans Co. has an annual plant capacity of 65,000 units, and current production is 45,000 units. Monthly fixed costs are $40,000, and variable costs are $25 per unit. The present selling price is $35 per unit. On February 2, 2012, the company received an offer from Miller Company for 15,000 units of the product at $27 each. Miller 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 Country Jeans Co.

a. Prepare a differential analysis on whether to reject (Alternative 1) or accept (Alternative 2) the Miller order.

b. Briefly explain the reason why accepting this additional business will increase operating income.

c. What is the minimum price per unit that would produce a positive contribution margin?