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 1,010,000 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 Total

Undergarment

Direct materials $ 1.91 1,929,100

Direct labor 0.41 414,100

Variable manufacturing overhead 0.96 969,600

Fixed manufacturing overhead 1.48 1,494,800

Variable selling expenses 0.31 313,100

_________________ _______________

Totals 5.07 5,120,700

The U.S. Army has approached Klean Fiber and expressed an interest in purchasing 250,000 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 $1.03 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.

show 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 Accept Net Income

Order Order Increase (Decrease)

Revenues __________ __________ __________

Variable Costs:

Direct materials __________ __________ __________

Direct labor __________ __________ __________

Variable overhead __________ __________ __________

Total variable costs __________ __________ __________

Net income __________ __________ __________

Should Klean Fiber accept the Army's offer?

Kelan Fiber Should Accept/Reject the army's offer.