Accept Business at Special Price

Product A is normally sold for $48 per unit. A special price of $32 is offered for the export market. The variable production cost is $26 per unit. An additional export tariff of 15% of revenue must be paid for all export products. Assume there is sufficient capacity for the special order.

a. Prepare a differential analysis dated March 16 on whether to reject (Alternative 1) or accept (Alternative 2) the special order. If required, round your answers to two decimal places. If an amount is zero, enter "0".

Differential Analysis
Reject Order (Alt. 1) or Accept Order (Alt. 2)
March 16
	Reject Order (Alternative 1)	Accept Order (Alternative 2)	Differential Effects (Alternative 2)
Revenues, per unit
Costs:
Variable manufacturing costs, per unit
Export tariff, per unit
Profit (loss), per unit

Differential Analysis for a Lease or Sell Decision

Burlington Construction Company is considering selling excess machinery with a book value of $277,200 (original cost of $398,800 less accumulated depreciation of $121,600) for $277,200, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $284,500 for five years, after which it is expected to have no residual value. During the period of the lease, Burlington Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,700.

b. Prepare a differential analysis dated January 15 to determine whether Burlington Construction Company should lease (Alternative 1) or sell (Alternative 2) the machinery. If required, use a minus sign to indicate a loss.

Differential Analysis
Lease (Alt. 1) or Sell (Alt. 2) Machinery
January 15
	Lease Machinery (Alternative 1)	Sell Machinery (Alternative 2)	Differential Effects (Alternative 2)
Revenues
Costs
Profit (Loss)