Question

stryker industries received an offer from an exporter for 15,000 units of product at $17.50 per unit. the acceptance of the offer will not affect normal production or domestic sales prices. the following data are available: line item description amount domestic unit sales price $20 unit manufacturing costs: variable 11 fixed 1 the differential revenue from the acceptance of the offer is

Answer 1

The differential revenue from the acceptance of the offer by Stryker Industries is solely the revenue from the offer, which is $262,500, since the acceptance won't affect normal production or domestic sales.

Step-by-step explanation:

The differential revenue from the acceptance of the offer is the additional revenue Stryker Industries would receive from the sale of 15,000 units at the offer price, minus any revenue they would have received at the domestic unit sales price. Assuming the offer does not affect normal sales, we calculate differential revenue by subtracting the domestic unit sales revenue from the offer revenue.

The offer revenue is 15,000 units multiplied by the offer price of $17.50 per unit. There is no mention of the domestic sale quantities, but since the acceptance of the offer will not affect normal production or domestic sales prices, we do not need to consider them here. The equation is: Differential Revenue = 15,000 units * $17.50/unit - (15,000 units * domestic sales price). Without the domestic sales price given for the 15,000 units, we focus solely on the offer's revenue, equaling $262,500 (15,000 * $17.50).

Answer 2

The differential cost from accepting the offer is $97,500.

To calculate the differential cost from the acceptance of the offer, we need to understand that the differential cost is the difference in the company's costs between two alternatives. In this case, the alternatives are accepting or not accepting the offer to sell additional units at a given price.

From the information provided:

- The offer is to sell 15,000 units at $17.50 per unit.

- The unit manufacturing costs consist of variable costs of $11 and fixed costs of $1.

Since the acceptance of the offer will not affect normal production or domestic sales prices, the fixed costs are likely to remain unchanged (sunk cost) and do not affect the differential cost. Therefore, we only need to consider the variable costs for the additional units.

Here are the steps to calculate the differential cost:

1. Calculate the total variable cost for the additional units if the offer is accepted:

`\[ \text{Total Variable Cost} = \text{Variable Cost per Unit} * \text{Number of Units} \]`

`\[ \text{Total Variable Cost} = $11 * 15,000 \]`

2. Calculate the total revenue from the offer:

`\[ \text{Total Revenue} = \text{Offer Price per Unit} * \text{Number of Units} \]`

`\[ \text{Total Revenue} = $17.50 * 15,000 \]`

3. The differential cost is the total variable cost subtracted from the total revenue:

`\[ \text{Differential Cost} = \text{Total Revenue} - \text{Total Variable Cost} \]`

Let's perform these calculations.

Here's the step-by-step calculation for the differential cost:

Step 1: Calculate the total variable cost for the additional units.

`\[ \text{Total Variable Cost} = \text{Variable Cost per Unit} * \text{Number of Units} \]`

`\[ \text{Total Variable Cost} = \$11 * 15,000 \]`

`\[ \text{Total Variable Cost} = \$165,000 \]`

Step 2: Calculate the total revenue from the offer.**

`\[ \text{Total Revenue} = \text{Offer Price per Unit} * \text{Number of Units} \]`

`\[ \text{Total Revenue} = \$17.50 * 15,000 \]`

`\[ \text{Total Revenue} = \$262,500 \]`

Step 3: Calculate the differential cost, which is the difference between the total revenue and the total variable cost.

`\[ \text{Differential Cost} = \text{Total Revenue} - \text{Total Variable Cost} \]`

`\[ \text{Differential Cost} = \$262,500 - \$165,000 \]`

`\[ \text{Differential Cost} = \$97,500 \]`

The differential cost from accepting the offer is $97,500.