Down Home Jeans Co. has an annual plant capacity of 63,900 units, and current production is 43,700 units. Monthly fixed costs are $39,700, and variable costs are $25 per unit. The present selling price is $37 per unit. On February 2, 2014, the company received an offer from Fields Company for 13,000 units of the product at $27 each. Fields Company will market the units in a foreign country under its own brand name. The additional business is not expected to affect the domestic selling price or quantity of sales of Down Home Jeans Co.
a. Prepare a differential analysis on whether to reject (Alternative 1) or accept (Alternative 2) the Fields order. If an amount is zero, enter zero “0.”
b. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places.
The budget cuts of late have encouraged Contracting Officers to more heavily favor price when evaluating proposals and often stipulate lowest technically acceptable proposal evaluation criteria.
What are some of the unintended consequences of that decision? How might that also negatively impact some higher-level Government policies or initiatives?
