Tris Technology Company produces a fibre cloth that could easily wipe away any dirt and water. The cost for each unit of their product is as follows: Materials : $2.00 Labor : $0.75 Variable Overhead : $1.00 Fixed Overhead : $1.50 Variable Selling Expenses : $0.25 If the company were operating at full capacity, they could produce 1,000,000 products. Currently, the company is only operating at 70% of its capacity. Ree Corporation approaches Tris Technology Company as they are interested in buying 150,000 of the fibre cloth. They agree to pay for the materials, labor, and also variable overhead. Moreover, they would pay an additional of $1 for each product to provide profit for Tris Technology Company. a. Prepare the incremental analysis for the special order. b. Should Tris Tech accept the special order? Why or why not?
1. Tris Technology Company produces a fibre cloth that could easily wipe away any dirt and water. The cost for each unit of their product is as follows:
Materials : $2.00
Labor : $0.75
Variable Overhead : $1.00
Fixed Overhead : $1.50
Variable Selling Expenses : $0.25
If the company were operating at full capacity, they could produce 1,000,000 products. Currently, the company is only operating at 70% of its capacity. Ree Corporation approaches Tris Technology Company as they are interested in buying 150,000 of the fibre cloth. They agree to pay for the materials, labor, and also variable overhead. Moreover, they would pay
an additional of $1 for each product to provide profit for Tris Technology Company.
a. Prepare the incremental analysis for the special order.
b. Should Tris Tech accept the special order? Why or why not?
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