Country Jeans Co. has an annual plant capacity of 66,800 units, and current production is 45,100 units. Monthly fixed costs are $39,600, and variable costs are $25 per unit. The present selling price is $33 per unit. On February 2, 2014, the company received an offer from Miller Company for 14,700 units of the product at $26 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 on whether to reject (Alternative 1) or accept (Alternative 2) the Miller order. If an amount is zero, enter zero “0”.
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b. Having unused capacity available is SelectrelevantirrelevantCorrect 1 of Item 2 to this decision. The differential revenue is SelectmorelessCorrect 2 of Item 2 than the differential cost. Thus, accepting this additional business will result in a net SelectgainlossCorrect 3 of Item 2.
c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places.
