Question

Accept Business at Special Price Product D is normally sold for $49 per unit. A special price of $33 is offered for the export market. The variable production cost is $26 per unit. An additional export tariff of 13% of revenue must be paid for all export products. Assume that there is sufficient capacity for the special order. Prepare a differential analysis dated March 16, 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 "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Reject Order (Alt. 1) or Accept Order (Alt. 2) March 16 Reject Order Accept Order (Alternative 1) (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)?

Answer 1

(1) if the order is rejected the value would be 0

	reject	accept	differential
revenues per unit	0	33	33
costs
variable manufacturing	0	26	(26)
tariff	0	4.29[33*13%]	(4.29)
income(Loss)	0	2.71	2.71

yes the order should be accepted as it will result in incremental income of 2.71$ per unit.