Down Home Jeans Co. has an annual plant capacity of 66,700 units, and current production is 46,900 units. Monthly fixed costs are $39,400, and variable costs are $25 per unit. The present selling price is $38 per unit. On November 12 of the current year, the company received an offer from Fields Company for 17,000 units of the product at $27 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. a. Prepare a differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Fields order. If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or neg ative numbers use a minus sign. Differential Analysis Reject Order (Alt. 1) or Accept Order (Alt. 2) November 12 Differential Effect Reject Order Accept Order (Alternative 1) (Alternative 2 (Alternative 2) Revenues Costs: Variable manufacturing costs Income (Loss) than the to this decision. The differential revenue is b. Having unused capacity available is 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 What is the minimum Decision on Accepting Additional Business tstone Tire and Rubber Company has capacity to produce 153,000 tires. Brightstone presently produces and sells 17,000 tires for the North American market at a price of $106 per tir e. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 18,000 tires for $84.4 is as follows: Direct materials Direct labor Factory overhead (60% variable) Selling and administrative expenses (30% variable) Total Brightstone pays a selling commission equal to 5% of the selling price on North American orders, which is included in the variable portion of the selling and administrative expenses. However, this special order would not have a sales commission. If the order was accepted, the per tire. Brightstone's accounting system indicates that the total cost per tire $40 15 24 21 $100 K) tires would be shipped overseas for an additional shipping cost of s6 per tire. In adition, Euro has made the order conditional on receiving European safety certification. Brightstone estimates that this certification would cost $100,800. a. Prepare a differential analysis dated January 21 on whether to reject (Alternative 1) or accept (Alternative 2) the special order from Euro Motors. If an amount is zero, enter zero "0" If required, round interim calculations to two decimal places Differential Analysis Reject Order (Alt. 1) or Accept Order (Alt. 2) January 21 Differential Effect Accept Order Reject Order (Alternative 1) (Alternative 2) on Income (Alternative 2) Revenues ial Jhalysis dated January 21 on whether to reject (Alternative 1) or accept (Alternative 2) the special order fronm Euro Motors. If an amount is zero, enter zero "o. If required, round interim calculations to two decimal places. Differential Analysis Reject Order (Alt. 1) or Accept Order (Alt. 2) January 21 Reject Order Accept Order Differential Effect (Alternative 1) (Alternative 2) on Income (Alternative 2) Revenues Costs: Direct materials Direct labor Variable factory overhead Variable selling and admin. expenses Shipping costs Certification costs Income (Loss) Determine whether to reject (Alternative 1) or accept (Alternative 2) the special order from Euro Motors. b. What is the minimum price per unit that would be financially acceptable to Brightstone? Round your answer to two decimal places per unit
