Assume that as of August 1, 3,000 units of flat panel displays have been produced and sold during the current year. Analysis of the domestic market indicates that 2,000 additional units are expected to be sold during the remainder of the year at the normal product price determined under the product cost method. On August 3, Crystal Displays Inc. received an offer from Maple Leaf Visual Inc. for 800 units of flat panel displays at $225 each. Maple Leaf Visual Inc. will market the units in Canada under its own brand name, and no variable selling and administrative expenses associated with the sale will be incurred by Crystal Displays Inc. The additional business is not expected to affect the domestic sales of flat panel displays, and the additional units could be produced using existing factory, selling, and administrative capacity. Required:
Prepare a differential analysis of the proposed sale to Maple Leaf Visual Inc.

Question Completion:

Crystal Displays Inc. recently began production of a new product, flat panel displays, which required the investment of $1,500,000 in assets. The costs of producing and selling 5,000 units of flat panel displays are estimated as follows:

Variable costs per unit:

Direct materials $120

Direct labor 30

Factory overhead 50

Selling and administrative expenses 35

Total variable cost per unit $235

Fixed costs:

Factory overhead $250,000

Selling and administrative expenses 150,000

Selling price is determined as $360 per unit under the product cost method.

Crystal Displays Inc.

Differential Analysis of Special Order:

                                         Normal           Special Order          Differential

                                      Production        Alternative 2              Analysis

Sales revenue            $1,800,000            $288,000              $288,000

Variable costs               1,175,000                188,000                 188,000

Contribution margin    $625,000             $100,000              $100,000

Fixed costs:

Factory overhead       $250,000              $0                           $0

Selling and admin.

  expenses                    150,000                0                             0

Total fixed costs         $400,000              $0                           $0

Net income                 $225,000              $100,000              $100,000

Explanation:

a) Data and Calculations:

Investment in assets = $1,500,000

Normal Production and sales units = 5,000

Cost of production and sales:

Variable costs per unit:

Direct materials                     $120  

Direct labor                               30

Factory overhead                     50

Selling and

administrative expenses         35

Total variable cost per unit $235

Fixed costs:

Factory overhead                             $250,000

Selling and administrative expenses 150,000

Total fixed costs                               $400,000

Special order from Maple Leaf Visual Inc.

Quantity ordered = 800 units

Offer price per unit = $225

Selling price per unit = $360

answer; dogs;

answer; to open a new transaction, the user should type the code/0 along with a new transaction code, when done with that the user should press enter to open the transaction; good luck;