Decision on Accepting Additional Business

Down Home Jeans Co. has an annual plant capacity of 67,000 units, and current production is 46,000 units. Monthly fixed costs are $39,000, and variable costs are $25 per unit. The present selling price is $32 per unit. On February 2, 2014, the company received an offer from Fields Company for 13,200 units of the product at $29 each. Fields 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 Down Home Jeans Co.

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a. Prepare a differential analysis on whether to reject (Alternative 1) or accept (Alternative 2) the Fields order. If an amount is zero, enter zero "0".

Differential Analysis
Reject Order (Alt. 1) or Accept Order (Alt. 2)
February 2, 2014
		Reject Order (Alternative 1)		Accept Order (Alternative 2)		Differential Effect on Income (Alternative 2)
Revenues		$		$		$
Costs:
Variable manufacturing costs
Income (Loss)		$		$		$