Solution-Determine tina would better off accepting or

Determine tina would better off accepting or rejecting order

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Reference no: EM132463986

Question - The following monthly financial data is for Tina's T-Shirt Company. The company makes 25,000 T-shirts each month.

	Per unit	Total monthly data at 25,000 units
Sales revenue	$10.00	$250,000
Variable costs	5.50	137,500
Contribution margin	$4.50	$112,500
Fixed costs		98,000
Profit		$14,500

Tina is approached by a local youth camp that would like to have 2,000 T-shirts produced. The camp asked Tina to produce the shirts for $9.00 each rather than the standard price of $10.00. Tina can produce up to 28,000 shirts a month, so the special order will not affect regular customer sales. Variable costs per unit will remain at $5.50, but production of the shirts will require a special machine that costs $2,500. This special order will have no other effect on monthly fixed costs.

Required -

(1) Using differential analysis, determine whether Tina would be better off accepting or rejecting the special order.

(2) Assume Tina can only produce 25,000 T-shirts per month, and that regular customer sales would decrease as a result of the special order. Using differential analysis, determine whether Tina would be better off accepting or rejecting the special order.

Reference no: EM132463986

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Determine tina would better off accepting or rejecting order

Reference no: EM132463986

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