Homestead Jeans Co. has an annual plant capacity of 60,300 units, and current production is 47,100 units. Monthly fixed costs are $54,600, and variable costs are $32 per unit. The present selling price is $45 per unit. On November 12 of the current year, the company received an offer from Dawkins Company for 11,000 units of the product at $36 each. Dawkins 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 Homestead Jeans Co.

Labels

Cash flows from operating activities

Costs

Amount Descriptions

Cash payments for merchandise

Cash received from customers

Income (loss)

Revenues

Variable manufacturing costs

a. Prepare a differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Dawkins order. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required.

Differential Analysis

Reject (Alternative 1) or Accept (Alternative 2) Order

November 12

1		Reject Order	Accept Order	Differential Effect on Income
2		(Alternative 1)	(Alternative 2)	(Alternative 2)
3
4
5
6

b. Briefly explain the reason why accepting this additional business will increase operating income.

Having unused capacity available is to this decision. The differential revenue is than the 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?

Homestead Jeans Co. has an annual plant capacity of 80,300 units, and current production is 47.100 units Monthly fixed costs are $54.800, and variable costs are $32 per unit. The present selling price is $45 per unit. On November 12 of the current year the company received an otter from Dawkins Company for 11,000 units of the produc at $36 each Dawkins Company will market the units in a foreign country under its own brand name The additional business is not expected to affedt the domestic selling price or quantity of sales of Homestead Jeans Co. Final Questions Labels Gash flows from operating activities Costs a. Prepare a gitferential anelsis dated November 12 on whether to reject (Altemative 1) or accept (Altemative 2) the Dawkina order Refer to the liats of Labelz and Amount Descriptions for the exact wording of the anawer choices for text entries. For those boxas in which you must enter subtracted or negative numbera use a minus sign ? here A8 no amount or an amount 12 zero, enter "O". A colon () will automatically appear if required. Cash payments for merchandise Cash reosived from customers income (l0ss) Differential Analysis Rejedt (Alternative 1) or Accept (Altemative 2) Order November 12 Variable manufacturing costs Diflevential Reject OrderAccept Oeder Eflect on Incose b. Briefly explain the reason why accepting this additional business will increace operating income Having unused capecity available is to this decision. The aferential revenue iaanthe differential cost Thus, accepting this additional business will result in a netY What is the minimum price per unit that would produce a positive contribution margin