Solution a:
Differential Analysis | |||
Reject Order (Alt. 1) or Accept Order (Alt. 2) | |||
Nov-12 | |||
Reject Order (Alternative 1) |
Accept Order (Alternative 2) |
Differential Effect on Income (Alternative 2) | |
Revenues (15700*$26) | $0 | $4,08,200 | $4,08,200 |
Costs: | |||
Variable manufacturing costs ($15700*$25) | $0 | -$3,92,500 | -$3,92,500 |
Income (Loss) | $0 | $15,700 | $15,700 |
Solution b:
Having unused capacity available is relevant to this decision.
The differential revenue is more than the differential costs. Thus,
accepting this additional business will result in a net
gain.
Solution c:
Minimum price per unit = $25.01
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