Accept Business at Special Price Product A is normally sold

Accept Business at Special Price Product A is normally sold for $44 per unit. A special price of $31 is offered for the export market. The variable production cost is $26 per unit. An additional export tariff of 14% of revenue must be paid for all export products. Assume there is sufficient capacity for the special order. a. 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 (Alternative 1) Differential Effect on Income (Alternative 2) Accept Order (Alternative 2) Revenues, per unit 31 31 Costs: Variable manufacturing costs, per unit -26 -26 Export tariff, per unit 0 -8.06 -8.06 Income (Loss), per unit b. Should the special order be rejected (Alternative 1) or accepted (Alternative 2)? Accept the special order

Solution

Differential analysis :

b) Accept the special order

	Reject order (alternative 1)	Accept order (Alternative 2)	Differential effect on income (alternative 2)
Revenue per unit	0	31	31
Costs :
Variable manufacturing cost per unit	0	-26	-26
Export tarrif, per unit	0	-4.34	-4.34
Income (loss) per unit	0	0.66	0.66