accounting-IMC has a normal plant capacity of 37,500 parts per month

QUESTION

IMC has a normal plant capacity of 37,500 parts per month. Because of an extra large quantity of inventory on hand, it expects to produce only 30,000 parts in May. Monthly fixed costs and expenses are $112,500 ($3 per unit at normal plant capacity) and variable costs and expenses are $8.25 per part. The present selling price is $13.50 per part. The company has an opportunity to sell 7,500 additional parts at $9.90 per part 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 IMC.Prepare a differential analysis report, dated April 21 of the current year, on the proposal to sell at the special price.

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