Decision on Accepting Additional Business

Country Jeans Co. has an annual plant capacity of 63,200 units, and current production is 47,000 units. Monthly fixed costs are $39,200, 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 13,400 units of the product at $29 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.

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a. Prepare adifferential analysison whether to reject (Alternative 1) or accept (Alternative 2) the Miller order. If an amount is zero, enter zero "0".

Differential Analysis
Reject Order (Alt. 1) or Accept Order (Alt. 2)
February 2, 2012
Reject Order (Alternative 1)	Accept Order (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$	$	$
Costs
Variable manufacturing costs
Income (Loss)	$	$	$

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

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c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places.