Question

4. Il The Sirap restaurant bakes its own bread for $160 per batch, including fixed costs of $38 per batch. A proposal is offered to purchase bread from an outside source for $109 per batch, plus $8 per batch for delivery. Provide a differential analysis for the outside purchase proposal. (14 Pts.) IV Product Zeon is normally sold for $55 per unit. A special price of $46 is offered for the export market The variable production cost is $32 per unit. An additional export tariff of 15% of revenue must be paid for all export products. Determine the differential income or loss per unit from selling product Zeon for export. (14 Pts.)

Answer 1

Answer 4-III
Differencial analysis for the outside purchase porposal
	Bakes Own bread	Purchase from outside	Differencial Income / (loss) per batch
Variable cost to bake	$122.00	$0.00
Fixed cost	$38.00	$38.00
Purchase cost	$0.00	$109.00
Delivery cost	$0.00	$8.00
Total	$160.00	$155.00	$5.00
As there is differencial income of $5 per batch , Sirap restaurant should accept the proposal
to purchase bread from outside.
Answer 4-IV
Differencial analysis for selling product Zeon for Export
	Normal Sale	Export sale	Differencial Income / (loss) per unit
Variable production cost	$32.00	$32.00
Additional export Tariff [$46 * 15%]	$0.00	$6.90
Additional revenue lost [$55 - $46]	$0.00	$9.00
Total	$32.00	$47.90	-$15.90
As there is diferencial loss per unit of $15.90 , Product Zeon should not be exported.