IDNLearn.com provides a collaborative environment for finding and sharing answers. Join our platform to receive prompt and accurate responses from experienced professionals in various fields.

Diamond Boot Factory normally sells its specialty boots for $22 a pair. An offer to buy 120 boots for $18 per pair was made by an organization hosting a national event in Norfolk. The variable cost per boot is $8, and special stitching will add another $2 per pair to the cost. Determine the differential income or loss per pair of boots from selling to the organization.

Sagot :

Answer:

Differential income = $960

Explanation:

In a special order decision , the offer should be accepted if the sales revenue from the order is greater than the relevant costs of the special orders.

The relevant costs of the special order = variable cost + additional cost of special stitching machine

                                                                                          $

Sales revenue    (120× $18)                                          2,160      

The relevant costs of the special order

= (120×8) + (120×2)                                                       (1,200)

Differential income                                                         960