Question

Klean Fiber Company is the creator of Y-Go, a technology that weaves silver into its fabrics to kill bacteria....

Send to Gradebook Prev Next > bmitted to Gradebook, Wed Feb 26, 2020, 6:12 22 PM( A -05:00 rcaNew York Question 8 View Policies Current Attempt in Progress 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 1.090.000 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 Direct labor Undergarment 0.59 0. 59 1. 07 $2,114,600 6 43.100 .166,300 1 Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses 1. 46 1 ,591,400 0. 32 55.38 3 48.800 $5.864,200 Totals The U.S. Army has approached Klean Fiber and expressed an interest in purchasing 249400 Y Go undergarments for soldes extremely warm climates. The Army would pay the unit cost for directorials, direct labor and variable manufacturing overhead costs. In addit i nhos agreed to pay an additional $1,01 per underwent to cover all other costs and provide a pront. Presenti Neanfiburi capacity and does not have any other potential buyers too. If Klean Fiber accepts the Anys oferit within dahi l expenses related to this order

Answer 1

	Reject order	Accept order	Net income increase(decrease)
Revenues	0	1149734	1149734
Variable costs:
Direct materials	0	483836	-483836
Direct labor	0	147146	-147146
Variable overhead	0	266858	-266858
Total variable costs	0	897840	-897840
Net income	0	251894	251894
Klean Fiber should accept the Army offer
Workings:
Revenues	1149734	=249400*(1.94+0.59+1.07+1.01)
Variable costs:
Direct materials	483836	=249400*1.94
Direct labor	147146	=249400*0.59
Variable overhead	266858	=249400*1.07