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Print by: Alejandro Rios Quintero ACCT-102-01:ACCT 102-01 Principles of Accounting II /Homework- Chapter 20 *Exercise 20-4 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 1,035,000 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. Total $2,070,000 610,650 1,014,300 1,521,450 372,600 $5,589,000 Per Undergarment Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses $2.00 0.59 0.98 1.47 0.36 $5.40 Totals The U.S. Army has approached Klean Fiber and expressed an interest in purchasing 250,900 Y-Go undergarments for soldiers in extremely warm climates. The Army would pay the unit cost for direct materials, direct labor, and variable manufacturing overhead costs. In addition, the Army has agreed to pay an additional $0.99 per undergarment to cover all other costs and provide a profit. Presently, Klean Fiber is operating at 70% capacity and does not have any other potential buyers for Y-Go. If Klean Fiber accepts the Army's offer, it will not incur any variable selling expenses related to this order. Prepare an incremental analysis for the Klean Fiber. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Reject Order Accept Order Net Income Increase (Decrease) Revenues Variable costs: Direct materials Direct labor Variable overhead Total variable costs Net income Should Klean Fiber accept the Army's offer? 4/9