Decision on Accepting Additional Business

Country Jeans Co. has an annual plant capacity of 65,500 units, and current production is 43,600 units. Monthly fixed costs are $41,600, and variable costs are $25 per unit. The present selling price is $33 per unit. On November 12 of the current year, the company received an offer from Miller Company for 17,000 units of the product at $26 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 dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Miller order. 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
	Reject Order (Alternative 1)	Accept Order (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$fill in the blank ad3e3c00efa401e_1	$fill in the blank ad3e3c00efa401e_2	$fill in the blank ad3e3c00efa401e_3
Costs:
Variable manufacturing costs	fill in the blank ad3e3c00efa401e_4	fill in the blank ad3e3c00efa401e_5	fill in the blank ad3e3c00efa401e_6
Income (Loss)	$fill in the blank ad3e3c00efa401e_7	$fill in the blank ad3e3c00efa401e_8	$fill in the blank ad3e3c00efa401e_9

b. Having unused capacity available is to this decision. The differential revenue is than the differential cost. Thus, accepting this additional business will result in a net .

c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places. $fill in the blank c424affdaff8042_4

Differential Analysis for a Discontinued Product

A condensed income statement by product line for Crown Beverage Inc. indicated the following for Royal Cola for the past year:

Sales	$232,400
Cost of goods sold	112,000
Gross profit	$120,400
Operating expenses	143,000
Loss from operations	$(22,600)

It is estimated that 14% of the cost of goods sold represents fixed factory overhead costs and that 21% of the operating expenses are fixed. Since Royal Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued.

a. Prepare a differential analysis, dated March 3, to determine whether Royal Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss.

Differential Analysis
Continue Royal Cola (Alt. 1) or Discontinue Royal Cola (Alt. 2)
January 21
	Continue Royal Cola (Alternative 1)	Discontinue Royal Cola (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$fill in the blank 720e8d036fb6faf_1	$fill in the blank 720e8d036fb6faf_2	$fill in the blank 720e8d036fb6faf_3
Costs:
Variable cost of goods sold	fill in the blank 720e8d036fb6faf_4	fill in the blank 720e8d036fb6faf_5	fill in the blank 720e8d036fb6faf_6
Variable operating expenses	fill in the blank 720e8d036fb6faf_7	fill in the blank 720e8d036fb6faf_8	fill in the blank 720e8d036fb6faf_9
Fixed costs	fill in the blank 720e8d036fb6faf_10	fill in the blank 720e8d036fb6faf_11	fill in the blank 720e8d036fb6faf_12
Income (Loss)	$fill in the blank 720e8d036fb6faf_13	$fill in the blank 720e8d036fb6faf_14	$fill in the blank 720e8d036fb6faf_15

b. Should Star Cola be retained? Explain. Yes

As indicated by the differential analysis in part (A), the income would decrease by $fill in the blank 76aac7fbeff4f9c_3 if the product is discontinued.