Question

Accept Business at Special Price Product Ris normally sold for $41 per unit. A special price of $34 is offered for the export market. The variable production cost is $25 per unit. An additional export tariff of 16% of revenue must be paid for all export products. Assume that there is sufficient capacity for the special order. Prepare a differential analysis dated March 16, on whether to reject (Alternative 1) or accept (Alternative 2) the special order. If required, round your answers to two decimal places. If an amount is zero, enter "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) March 16 Reject Order Accept Order (Alternative 1) (Alternative 2) Differential Effect on Income (Alternative 2) Revenues, per unit Costs: Variable manufacturing costs, per unit Export tariff, per unit Income (Loss), per unit Should the special order be rejected (Alternative 1) or accepted (Alternative 2)?

Answer 1

	Reject order (Alternative 1)	Accept order (Alternative 2)	Differential effect on income(alternative 2)
Revenues per unit	0	$                       34.00	$                             34.00
Costs
Variable manufcturing cost per unit	0	$                      (25.00)	$                            (25.00)
Export tariff per unit	0	$                        (5.44)	$                              (5.44)
Income(loss) per unit	0	$                          3.56	$                                3.56
34*0.16	$                              5.44
The company should not accept the special order.
(Alternative 2)