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

Answer:

$9 loss

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.