Digital Displays Inc. recently began production of a new product, flat panel displays, which required the investment of $6,000,000 in assets. The costs of producing and selling 20,000 units of flat panel displays are estimated as follows:

6. Assume that as of October 31,16,000 units of flat panel displays have been produced and sold during the current year. Analysis of the domestic market indicates that 2,500 additional units are expected to be sold during the remainder of the year at the normal product price determined under the product cost method. On November 5 , Digital Displays Inc. received an offer from Andes Visual Inc. for 1,000 units of flat panel displays at $225 each. Andes Visual Inc. will market the units in Peru under its own brand name, and no variable selling and administrative expenses associated with the sale will be incurred by Digital Displays Inc. The additional business is not expected to affect the domestic sales of flat panel displays, and the additional units could be produced using existing factory, selling, and administrative capacity. a. Prepare a differential analysis of the proposed sale to Andes Visual Inc. If an amount is zero, enter "0". b. Based on the differential analysis in part (a), should the proposal be accepted? 1. Determine the amount of desired profit from the production and sale of flat panel displays. 2. Assuming that the product cost method is used, determine the following: 3. (Appendix) Assuming that the total cost method is used, determine the following: 4. (Appendix) Assuming that the variable cost method is used, determine the following: 5. The cost-plus approach price computed above should be viewed as a general guideline for establishing long-run normal prices; however, other considerations, such as , could lead management to establish a different short-run price. Product Pricing using the Cost-Plus Approach Methods; Differential Analysis for Accepting Additional Business units of flat panel displays are estimated as follows: pricing and has indicated that the displays must earn a 15% return on invested assets. Required