Tosca Industries Inc. has an annual plant capacity of 400,000 units, and current production is 320,000 units. Monthly fixed costs are $680,000, and variable costs are $29 per unit. The present selling price is $45 per unit. The company received an offer from DynaX Company for 50,000 units of the product at $32 each. DynaX 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 Tosca Industries Inc.
a. Prepare a differential analysis report for the proposed sale to DynaX Company.
b. Briefly explain the reason why accepting this additional business will increase operating income.
c. What is the minimum price per unit that would produce a contribution margin?

  • CreatedMarch 11, 2014
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