Question

Accept Business at Special Price

Product A is normally sold for $43 per unit. A special price of $32 is offered for the export market. The variable production cost is $26 per unit. An additional export tariff of 16% of revenue must be paid for all export products. Assume there is sufficient capacity for the special order.

a. 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 (Alternative 1)	Accept Order (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues, per unit	$fill in the blank 81d731fa5f99f94_1	$fill in the blank 81d731fa5f99f94_2	$fill in the blank 81d731fa5f99f94_3
Costs:
Variable manufacturing costs, per unit	fill in the blank 81d731fa5f99f94_4	fill in the blank 81d731fa5f99f94_5	fill in the blank 81d731fa5f99f94_6
Export tariff, per unit	fill in the blank 81d731fa5f99f94_7	fill in the blank 81d731fa5f99f94_8	fill in the blank 81d731fa5f99f94_9
Income (Loss), per unit	$fill in the blank 81d731fa5f99f94_10	$fill in the blank 81d731fa5f99f94_11	$fill in the blank 81d731fa5f99f94_12

b. Should the special order be rejected (Alternative 1) or accepted (Alternative 2)?

Answer 1

a.

	Reject Order (Alternative 1)	Accept Order (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues, per unit	$               -	$           32.00	$            32.00
Costs:
Variable manufacturing costs, per unit	$               -	$          (26.00)	$          (26.00)
Export tariff, per unit	$               -	$           (5.12)	$            (5.12)
Income (Loss), per unit	$               -	$             0.88	$              0.88

b. Special Order should be accepted.