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Carla Vista Fiber Company is the creator of Y-Go, a technology that weaves silver into its fabrics to kill bacteria and odor on clothing while
Carla Vista Fiber Company is the creator of Y-Go, a technology that weaves silver into its fabrics to kill bacteria and odor on clothing while managing heat. Y-Go has become very popular in undergarments for sports activities. Operating at capacity, the company can produce 1,047,000 Y-Go undergarments a year. The per unit and the total costs for an individual garment when the company operates at full capacity are as follows. Total Per Undergarment $1.91 Direct materials $1.999,770 Direct labor 0.45 471,150 Variable manufacturing overhead 1,120.290 Fixed manufacturing overhead 1.07 1.59 0.33 1,664.730 Variable selling expenses 345.510 $5,601.450 Totals $5.35 The US Army has approached Carla Vista Fiber and expressed an interest in purchasing 250,700 Y-Go undergarments for soldiers in extremely warm climates. The Army would pay the unit cost for direct materials, direct labor, and variable manufacturing overhead costs. In addition, the Army has agreed to pay an additional $1.02 per undergarment to cover all other costs and provide a profit. Presently, Carla Vista Fiber is operating at 70% capacity and does not have any other potential buyers for Y-Go. If Carla Vista Fiber accepts the Army's offer, it will not incur any variable selling expenses related to this order. Prepare an incremental analysis for the Carla Vista Fiber. (Enter negative amounts using either a negative sign preceding the numbereg -45 or parentheseses (45).) Reject Order Accept Order Net Income Increase (Decrease) Revenues Variable costs: Direct materials Direct labor Variable overhead Total variable costs Net income Should Carla Vista Fiber accept the Army's offer? Carla Vista Fiber should v the Army's offer
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