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Exercise 7-4 Klean Fiber Company is the creator of Y-Go, a technology that weaves silver into its fabrics to kill bacteria and odor on clothing
Exercise 7-4 Klean Fiber Company is the creator of Y-Go, a technology that weaves silver into its fabrics to kill bacteria and odor on clothing while managing heat. Y-Go has become very popular in undergarments for sports activities. Operating at capacity, the company can produce 1,000,000 Y-Go undergarments a year. The per unit and the total costs for an individual garment when the company operates at full capacity are as follows.
Per Undergarment | Total | |
Direct materials | $2.00 | $2,000,000 |
Direct labor | 0.75 | 750,000 |
Variable manufacturing overhead | 1.00 | 1,000,000 |
Fixed manufacturing overhead | 1.50 | 1,500,000 |
Variable selling expenses | 0.25 | 250,000 |
Totals | $5.50 | $5,500,000 |
Reject Order | Accept Order | Net Income Increase (Decrease) | |
Revenues | $ | $ | $ |
Variable costs: | |||
Direct materials | |||
Direct labor | |||
Variable overhead | |||
Total variable costs | |||
Net income | $ | $ | $ |
Klean Fiber should rejectacceptthe Armys offer. |
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