Accept Business at Special Price Product D is normally sold for $40 per unit. A
ID: 2468046 • Letter: A
Question
Accept Business at Special Price Product D is normally sold for $40 per unit. A special price of $34 is offered for the export market. The variable production cost is $25 per unit. An additional export tariff of 16% of revenue must be paid for all export products. Assume there is sufficient capacity for the special order. Hide Prepare a differential analysis dated July 7, 2014, on whether to reject (Alternative 1) or accept (Alternative 2) the special order. If required, round your answers to two decimal places. If an amount is zero, enter zero "0". Differential Analysis Reject Order (Alt. 1) or Accept Order (Alt. 2) July 7, 2014 Reject Order (Alternative 1) Accept Order (Alternative 2) Differential Effect on Income (Alternative 2) Revenues, per unit $ $ $ Costs: Variable manufacturing costs, per unit Export tariff, per unit Income (Loss), per unit $ $ $ Should the special order be rejected (Alternative 1) or accepted (Alternative 2)? SelectReject the special orderAccept the special order Check My Work (2 remaining) Icon Key Icon Key Previous Question 6 of 8 Next Practice Exercise 25-06 Algorithmic
Explanation / Answer
As shown above, there is profit in accepting the special order. So choose alternative 2 and accept the offer
Particulars Amount Selling price 34 Less: Variable exp 25 Less: Additional Cost (34*6%) 2.04 Profit 6.96