Decision on Accepting Additional Business Down Home Jeans Co. has an annual plant capacity of 63,600 units, and current production is 43,900 units. Monthly fixed costs are $38,200, and variable costs are $25 per unit. The present selling price is $34 per unit. On November 12 of the current year, the company received an offer from Fields Company for 14,100 units of the product at $27 each. Fields Company will market the units in a foreign country under its own brand name. The additional business is not expected to affect the domestic selling price or quantity of sales of Down Home Jeans Co.

a. Prepare a differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Fields order. If an amount is zero, enter zero "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) November 12 Reject Order (Alternative 1) Accept Order (Alternative 2) Differential Effect on Income (Alternative 2)

Revenues $ $ $

Costs: Variable manufacturing costs Income

(Loss) $ $ $

b. Having unused capacity available is (irrelevent or relevent) to this decision. The differential revenue is (more or less) than the differential cost. Thus, accepting this additional business will result in a net (gain or loss) .

c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places. $

Decision on Accepting Additional Business

Homestead Jeans Co. has an annual plant capacity of 63,900 units, and current production is 46,700 units. Monthly fixed costs are $38,100, and variable costs are $25 per unit. The present selling price is $38 per unit. On November 12 of the current year, the company received an offer from Dawkins Company for 15,600 units of the product at $27 each. Dawkins Company will market the units in a foreign country under its own brand name. The additional business is not expected to affect the domestic selling price or quantity of sales of Homestead Jeans Co.

a. Prepare a differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Dawkins order. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Feedback

Subtract the additional costs from the additional revenues for accepting the order.

Learning Objective 1.

b. Having unused capacity available is relevant  to this decision. The differential revenue is more  than the differential cost. Thus, accepting this additional business will result in a net gain .

c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places.
$

Decision on Accepting Additional Business

Down Home Jeans Co. has an annual plant capacity of 64,700 units, and current production is 46,600 units. Monthly fixed costs are $39,400, and variable costs are $25 per unit. The present selling price is $32 per unit. On November 12 of the current year, the company received an offer from Fields Company for 16,400 units of the product at $27 each. Fields Company will market the units in a foreign country under its own brand name. The additional business is not expected to affect the domestic selling price or quantity of sales of Down Home Jeans Co.

a. Prepare a differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Fields order. If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

b. Having unused capacity available is   to this decision. The differential revenue is   than the differential cost. Thus, accepting this additional business will result in a net  .

c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places.

1. Decision on Accepting Additional Business

   Country Jeans Co. has an annual plant capacity of 66,400 units, and current production is 46,000 units. Monthly fixed costs are $38,500, and variable costs are $25 per unit. The present selling price is $38 per unit. On November 12 of the current year, the company received an offer from Miller Company for 16,100 units of the product at $27 each. Miller Company will market the units in a foreign country under its own brand name. The additional business is not expected to affect the domestic selling price or quantity of sales of Country Jeans Co.

   a. Prepare a differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Miller order. If an amount is zero, enter zero "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)
   November 12
   	Reject Order (Alternative 1)	Accept Order (Alternative 2)	Differential Effect on Income (Alternative 2)
   Revenues	$	$	$
   Costs:
   Variable manufacturing costs
   Income (Loss)	$	$	$

   b. Having unused capacity available is   to this decision. The differential revenue is   than the differential cost. Thus, accepting this additional business will result in a net  .

   c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places.
   $

Check My Work2 more Check My Work uses remaining.

27. In a perfectly competitive market,
A) firms can freely enter and exit.
B) firms sell a differentiated product.
C) transaction costs are high.
D) All of the above.

28. The "Got Milk?" advertising campaign is a good example of
A) advertising in a competitive market.
B) how advertising in a competitive market does not pay off for a single firm.
C) interest groups financed by the industry advertise for the whole industry.
D) All of the above.

29. A bike builder owns a bike shop earns $18,000 in revenue weekly. She pays $8,000 as
explicit costs and owns the shop so no rent is paid. The bike builder could work for other bike
shop and earn $10,000 per week. Her business profit is ________ and her economic profit is
________.
A) $10,000, $10,000
B) $28,000, $10,000
C) $10,000, $0
D) $8,000, $0

30. If the company E-bikes R US is producing at a level where losses are minimized, the
company
A) has no incentive to stay in the industry.
B) is better of exiting the industry.
C) is maximizing profits.
D) will shut down.

31. Suppose the company E-bikes R US produces bike seats and has an estimated fixed cost
of $7,000 and not sunk. The estimated variable cost for each bike seat is $20. The market
price for a bike seat is $25 each and the owner can sell 1000 bike seats at most each year. In
the long run, the owner
A) should shut down.
B) should keep operating.
C) should sell less.
D) None of the above.

Journalize entries to record the summarized operations related to production for a company using a job order cost system on December 31. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

A small equipment rental facility has nine appliance dollies. There are 14 customers every day who request this equipment. If the equipment is not available, they leave and go to a competing rental facility. Customers arrive evenly over a 12-hour period (6am to 6pm), 7 days per week. The average rental duration is 6 hours.

a. What is the likelihood that a customer going to the rental facility will find an appliance dolly available?

b. Assume each 6-hour rental is $10. How much revenue does the store make per week from the dollies?

c. Assume that a promotional campaign gives gift card worth $5 if the dolly is unavailable. What is the total gift card value that the store will have to issue on average per week?

d. What would be the payback time (not considering interest rates) in days for purchasing an additional dolly at $200?

E13.12 Apply definition and recognition criteria for revenues. LO7

The Conceptual Framework defines revenues and outlines a number of criteria for their recognition. Surfin’ Magazines Ltd identifies the following independent transactions and events:

(a) Received $24 000 in subscriptions for magazines to be delivered once per month for the next 12 months.

(b) Received dividends from IAG for shares owned by the business.

(c) Paid interest on a loan to purchase a delivery vehicle.

(d) Received a discount for early payment of a supplier’s invoice.

(e) Delivered magazines for the month for customers who had paid in advance.

(f) Delivered magazines and invoices to customers who had not prepaid their

subscriptions.

Required

For each of the items listed above, explain whether you would recognise it as revenue in the statement of profit or loss. Refer to the definition and recognition criteria outlined in the Conceptual Framework to support your answer.

Cicchetti Corporation uses customers served as its measure of activity. The following report compares the planning budget to the actual operating results for the month of December:

Prepare the company's flexible budget performance report for December. Select each variance as favorable (F), unfavorable (U) or "None".