Question
JJ Chemicals manufactures Chemicals products. XY Company has approached JJ Chemicals with a proposal to buy 8,000 Product A for $ 16 each. Regular customers
JJ Chemicals manufactures Chemicals products. XY Company has approached JJ Chemicals with a proposal to buy 8,000 Product A for $ 16 each. Regular customers are charged $ 17 for each of product A. JJ Chemicals has the necessary capacity. The following costs are associated annually with Product A with the company's normal production and sales of 40,000 products (product A)
Costs | $ |
Direct material | 84,000 |
Direct labor | 52,000 |
Manufacturing overhead | 36,000 |
Total | 172,000 |
Forty percent (40%) of the manufacturing overhead is variable and the remaining is fixed overheads
Required
Prepare an incremental analysis to analyze whether JJ Chemicals should accept the order from XY Company and comment on the results.
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