are $400,000, and variable costs are $9 per unit. The present selling price is $15 per unit. On July 6 of the current year, the company received an offer from Childs Company for 50,000 units of the product at $13 each. Childs 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 pr
Western Jeans Co. has an annual plant capacity of 2,000,000 units, and current production is 1,920,000 units. Monthly fixed costs are $400,000, and variable costs are $9 per unit. The present selling price is $15 per unit. On July 6 of the current year, the company received an offer from Childs Company for 50,000 units of the product at $13 each. Childs 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 Western Jeans Co.
Question Content Area
a. Prepare a differential analysis dated July 6 on whether to reject (Alternative 1) or accept (Alternative 2) the Childs order. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.
| Line Item Description | Reject Order (Alternative 1) |
Accept Order (Alternative 2) |
Differential Effects (Alternative 2) |
|---|---|---|---|
| Revenues | $Revenues | $Revenues | $Revenues |
| Costs: | |||
| Variable manufacturing costs | Variable manufacturing costs | Variable manufacturing costs | Variable manufacturing costs |
| $Profit (loss) | $Profit (loss) | $Profit (loss) |
Question Content Area
b. Having unused capacity available is fill in the blank 1 of 1
to this decision. The differential revenue is fill in the blank 2 of 3
than the differential cost. Thus, accepting this additional business will result in a net fill in the blank 3 of 3
.
c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places.
fill in the blank 1 of 1$
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