Question

Diamond Boot Factory normally sells its specialty boots for $21 a pair. An offer to buy 95 boots for $16 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 orga

Answer 1

To determine the differential income or loss per pair of boots, subtract the sum of the variable cost and special stitching cost per pair from the special order price, resulting in a $6 differential income per pair.

Step-by-step explanation:

The question involves calculating the differential income or loss when selling boots at a reduced price for a special bulk order. To determine the income or loss per pair, we need to compare the revenue from the special order with the total variable costs, including the additional special stitching cost.

We are given the following information:

• Normal selling price: $21 per pair
• Special order price: $16 per pair
• Variable cost per boot: $8
• Additional cost for special stitching: $2 per pair

To calculate the differential income or loss:

1. Calculate the total cost per pair, which is the sum of the variable cost and special stitching ($8 + $2 = $10).
2. Subtract the total cost per pair from the special order price ($16 - $10 = $6 differential income per pair).
3. The differential income per pair is $6, indicating a profit when accepting the special order.

Answer 2

$9 loss

Step-by-step explanation:

According to the scenario, computation of the given data are as follow:-

We can calculate the Differential Income or Loss by using following formula:-

Contribution Price Per Unit ( Normal Condition)

= Selling Price - Variable Cost

= $21 - $8

= $15

Contribution Price Per Unit(Offer From the Organization)

= Selling Price - Variable Cost - Special Stitching Cost

= $16 - $8 -$2

=$6

Differential Income/Loss Per Pair of Boots From Accepting the Special Offer = Contribution (Normal Condition) - Contribution( Offer From the Organization)

= $15 - $6

= $9

Factory gets $9 loss on per pair of boots.