Question

Exercise 21-4 Partially correct answer. Your answer is partially correct. Try again. Klean Fiber Company is the creator of Y-Go, a technology that weaves silver into its fabrics to kill bacteria and odor on clothing while managing heat. Y-Go has become very popular in undergarments for sports activities. Operating at capacity, the company can produce 1,048,000 Y-Go undergarments a year. The per unit and the total costs for an individual garment when the company operates at full capacity are as follows. Per Undergarment Total Direct materials $2.08 $2,179,840 Direct labor 0.59 618,320 Variable manufacturing overhead 1.02 1,068,960 Fixed manufacturing overhead 1.45 1,519,600 Variable selling expenses 0.33 345,840 Totals $5.47 $5,732,560 The U.S. Army has approached Klean Fiber and expressed an interest in purchasing 249,800 Y-Go undergarments for soldiers in extremely warm climates. The Army would pay the unit cost for direct materials, direct labor, and variable manufacturing overhead costs. In addition, the Army has agreed to pay an additional $1.10 per undergarment to cover all other costs and provide a profit. Presently, Klean Fiber is operating at 70% capacity and does not have any other potential buyers for Y-Go. If Klean Fiber accepts the Army’s offer, it will not incur any variable selling expenses related to this order. Prepare an incremental analysis for the Klean Fiber. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Reject Order Accept Order Net Income Increase (Decrease) Revenues $Entry field with correct answer 0 $Entry field with incorrect answer now contains modified data $Entry field with incorrect answer Variable costs: Direct materials Entry field with correct answer Entry field with incorrect answer Entry field with incorrect answer Direct labor Entry field with correct answer Entry field with incorrect answer Entry field with incorrect answer Variable overhead Entry field with correct answer Entry field with incorrect answer Entry field with incorrect answer Total variable costs Entry field with correct answer Entry field with incorrect answer Entry field with incorrect answer Net income $Entry field with correct answer $Entry field with incorrect answer $Entry field with incorrect answer Should Klean Fiber accept the Army's offer? Klean Fiber should Entry field with incorrect answer the Army’s offer.

Answer 1