Sunland 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 1,099,000 Y-Go undergarments a year. The per unit and the total costs for an individual garment when the company operates at a full capacity are as follows: The U.S Army has approached Sunland Fiber and expressed an interest in purchasing 250,200 Y-GO undergarments for soldiers in extremely warm climates. The Army would pay the unit cost for direct materials, direct labor, and manufacturing overhead costs. In addition, the Army has agreed to pay an additional $1.00 per undergarment to cover all other costs and provide a profit. Presently, Sunland Fiber is operating at 70% capacity and does not have any other potential buyers for Y-GO. If Sundland Fiber accepts the Army’s offer, it will not incite any variable selling expenses related to this order. Prepare an incremental analysis for the Sunland Fiber.
Sunland 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 1,099,000 Y-Go undergarments a year. The per unit and the total costs for an individual garment when the company operates at a full capacity are as follows: The U.S Army has approached Sunland Fiber and expressed an interest in purchasing 250,200 Y-GO undergarments for soldiers in extremely warm climates. The Army would pay the unit cost for direct materials, direct labor, and manufacturing overhead costs. In addition, the Army has agreed to pay an additional $1.00 per undergarment to cover all other costs and provide a profit. Presently, Sunland Fiber is operating at 70% capacity and does not have any other potential buyers for Y-GO. If Sundland Fiber accepts the Army’s offer, it will not incite any variable selling expenses related to this order. Prepare an incremental analysis for the Sunland Fiber.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Sunland 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 1,099,000 Y-Go undergarments a year. The per unit and the total costs for an individual garment when the company operates at a full capacity are as follows:
The U.S Army has approached Sunland Fiber and expressed an interest in purchasing 250,200 Y-GO undergarments for soldiers in extremely warm climates. The Army would pay the unit cost for direct materials, direct labor, and manufacturing overhead costs. In addition, the Army has agreed to pay an additional $1.00 per undergarment to cover all other costs and provide a profit. Presently, Sunland Fiber is operating at 70% capacity and does not have any other potential buyers for Y-GO. If Sundland Fiber accepts the Army’s offer, it will not incite any variable selling expenses related to this order.
Prepare an incremental analysis for the Sunland Fiber.
Transcribed Image Text:Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Variable selling expenses
Totals
Per Undergarment
$2.10
0.42
0.98
1.40
0.37
$5.27
Total
$2,307,900
461,580
1,077,020
1,538,600
406,630
$5,791,730
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