Reference no: EM132551084

Decision on Accepting Additional Business

Homestead Jeans Co. has an annual plant capacity of 65,000 units, and current production is 45,000 units. Monthly fixed costs are $54,000, and variable costs are $29 per unit. The present selling price is $42 per unit. On November 12 of the current year, the company received an offer from Dawkins Company for 18,000 units of the product at $32 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.

Question a. differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Dawkins order. If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.
Differential AnalysisReject Order (Alt. 1) or Accept Order (Alt. 2)November 12Reject
Order
(Alternative 1)Accept
Order
(Alternative 2)Differential
Effect
on Income
(Alternative 2)Revenues$$Costs:Variable manufacturing costsIncome (Loss)$$

Question b. 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.

Question c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places.