In: Accounting
Crystal Displays Inc. recently began production of a new product, flat panel displays, which required the investment of $1,500,000 in assets. The costs of producing and selling 5,000 units of flat panel displays are estimated as follows:
1 |
Variable costs per unit: |
|
2 |
Direct materials |
$119.00 |
3 |
Direct labor |
32.00 |
4 |
Factory overhead |
52.00 |
5 |
Selling and administrative expenses |
36.00 |
6 |
Total variable cost per unit |
$239.00 |
7 |
Fixed costs: |
|
8 |
Factory overhead |
$245,000.00 |
9 |
Selling and administrative expenses |
147,000.00 |
Crystal Displays Inc. is currently considering establishing a selling price for flat panel displays. The president of Crystal Displays has decided to use the cost-plus approach to product pricing and has indicated that the displays must earn a 17% return on invested assets.
Prepare a differential analysis of the proposed sale to Maple Leaf Visual Inc. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter “0”. A colon (:) will automatically appear if required.
Differential Analysis |
Reject (Alternative 1) or Accept (Alternative 2) Order |
August 3 |
1 |
Reject Order |
Accept Order |
Differential Effect on Income |
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2 |
(Alternative 1) |
(Alternative 2) |
(Alternative 2) |
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