Question

Accounting Help.

I don't know how to do this. Thank you

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 as an undergarment for sports activities. Operating at capacity, the company can produce 1,057,800 undergarments of Y-Go a year. The per unit and the total costs for an individual garment when the company operates at full capacity are as follows. Total Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Totals Per Undergarment $2.04 0.41 0.95 1.50 0.36 $5.26 $2,157,912 433,698 1,004,910 1,586,700 380,808 $5,564,028 The U.S. Army has approached Klean Fiber and expressed an interest in purchasing 250,100 Y-Go undergarments for soldiers in extremely warm climates. The Army would pay the unit cost for direct materials, direct labor, and variable manufacturing overhead costs. In addition, the Army has agreed to pay an additional $0.99 per undergarment to cover all other costs and provide a profit. Presently, Klean Fiber is operating at 70% capacity and does not have any other potential buyers for Y-Go. If Klean Fiber accepts the Army's offer, it will not incur any variable selling expenses related to this order.

Answer 1

	Reject order	Accept order	Net income increase(decrease)
Revenues	0	1097939	1097939
Variable costs:
Direct materials	0	510204	-510204
Direct labor	0	102541	-102541
Variable overhead	0	237595	-237595
Total variable costs	0	850340	-850340
Net income	0	247599	247599
Formulas used:
Revenues	1097939	=250100*(2.04+0.41+0.95+0.99)
Variable costs:
Direct materials	510204	=250100*2.04
Direct labor	102541	=250100*0.41
Variable overhead	237595	=250100*0.95