FDE Manufacturing Company has a normal plant capacity of 75,000 units per month.Because of an extra large quantity of inventory on hand, it expects to produce only 60,000 units in May.Monthly fixed costs and expenses are $150,000 ($2 per unit at normal plant capacity), and variable costs and expenses are $13 per unit.The present selling price is $25 per unit.The company has an opportunity to sell 5,000 additional units at $14.30 per unit to an exporter who plans to market the product under its own brand name in a foreign market.The additional business is therefore not expected to affect the regular selling price or quantity of sales of FDE Manufacturing Company.

Prepare a differential analysis report, dated April 21 of the current year, on the proposal to sell at the special price.

Question

FDE Manufacturing Company has a normal plant capacity of 75,000 units per month.Because of an extra large quantity of inventory on hand, it expects to produce only 60,000 units in May.Monthly fixed costs and expenses are $150,000 ($2 per unit at normal plant capacity), and variable costs and expenses are $13 per unit.The present selling price is $25 per unit.The company has an opportunity to sell 5,000 additional units at $14.30 per unit to an exporter who plans to market the product under its own brand name in a foreign market.The additional business is therefore not expected to affect the regular selling price or quantity of sales of FDE Manufacturing Company.
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Prepare a differential analysis report, dated April 21 of the current year, on the proposal to sell at the special price.

Quizplus · Accepted Answer

The Answer of FDE Manufacturing Company has a normal plant capacity of 75,000 units per month.Because of an extra large quantity of inventory on hand, it expects to produce only 60,000 units in May.Monthly fixed costs and expenses are $150,000 ($2 per unit at normal plant capacity), and variable costs and expenses are $13 per unit.The present selling price is $25 per unit.The company has an opportunity to sell 5,000 additional units at $14.30 per unit to an exporter who plans to market the product under its own brand name in a foreign market.The additional business is therefore not expected to affect the regular selling price or quantity of sales of FDE Manufacturing Company.
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Prepare a differential analysis report, dated April 21 of the current year, on the proposal to sell at the special price.

FDE Manufacturing Company Has a Normal Plant Capacity of 75,000