Daunting Company produces and sells 50,000 units of a new product while operating at 70% of...
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Daunting Company produces and sells 50,000 units of a new product while operating at 70% of its plant capacity. The company's records show the following information for the new product: Sales price per unit $70 Variable manufacturing cost per unit $45 Total fixed manufacturing costs $500,000 The company received a proposal from a foreign company to buy 10,000 units of the new product for $10 per unit. This is a one-time only order and acceptance of this proposal will not affect Daunting Company's regular sales. At this time, the president of Daunting Company is reluctant to accept the special order due to profitability concerns. Instructions 1. Use incremental analysis to analyze this proposal and indicate the incremental effect on net income (in dollars). Show your work. You must show your work to receive credit. (10 points) 2. What price should Daunting charge for the special order to break even (have incremental net income of $0)? Explain. (5 points) Daunting Company produces and sells 50,000 units of a new product while operating at 70% of its plant capacity. The company's records show the following information for the new product: Sales price per unit $70 Variable manufacturing cost per unit $45 Total fixed manufacturing costs $500,000 The company received a proposal from a foreign company to buy 10,000 units of the new product for $10 per unit. This is a one-time only order and acceptance of this proposal will not affect Daunting Company's regular sales. At this time, the president of Daunting Company is reluctant to accept the special order due to profitability concerns. Instructions 1. Use incremental analysis to analyze this proposal and indicate the incremental effect on net income (in dollars). Show your work. You must show your work to receive credit. (10 points) 2. What price should Daunting charge for the special order to break even (have incremental net income of $0)? Explain. (5 points)
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To analyze the special order proposal using incremental analysis we need to compare the incremental ... View the full answer
Related Book For
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078111044
16th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello
Posted Date:
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