80.2K

Verified Solution

Link Copied!

Crane Fiber Company is the creator of Y-Go, a technology that weaves silver into its fabrics to kill bacteria and odor on clothing while managing heat. Y-Go has become very popular in undergarments for sports activities. Operating at capacity, the company can produce 1,000,000 Y-Go undergarments a year. The per unit and the total costs for an individual garment when the company operates at full capacity are as follows. Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Totals Per Undergarment $1.90 0.40 0.95 1.40 0.30 $4.95 Total $1,900,000 400,000 950,000 1,400,000 300,000 $4,950,000 The U.S. Army has approached Crane Fiber and expressed an interest in purchasing 249,000 Y-Go undergarments for soldiers in extremely warm climates. The Army would pay the unit cost for direct materials, direct labor, and variable manufacturing overhead costs. In addition, the Army has agreed to pay an additional $0.95 per undergarment to cover all other costs and provide a profit. Presently, Crane Fiber is operating at 70% capacity and does not have any other potential buyers for Y-Go. If Crane Fiber accepts the Army's offer, it will not incur any variable selling expenses related to this order. Prepare an incremental analysis for the Crane Fiber. (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45).) Reject Order Accept Order Net Income Increase (Decrease) Revenues Variable costs: Direct materials Direct labor Variable overhead Total variable costs Net income Should Crane Fiber accept the Army's offer? Crane Fiber should the Army's offer

Answer & Explanation Solved by verified expert

See Answer