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6.

Assume that as of August 1, 3,000 units of flat panel displays have been produced and sold during the current year. Analysis of the domestic market indicates that 2,000 additional units are expected to be sold during the remainder of the year at the normal product price determined under the product cost method. On August 3, Crystal Displays Inc. received an offer from Maple Leaf Visual Inc. for 1,000 units of flat panel displays at $223 each. Maple Leaf Visual Inc. will market the units in Canada under its own brand name, and no variable selling and administrative expenses associated with the sale will be incurred by Crystal Displays Inc. The additional business is not expected to affect the domestic sales of flat panel displays, and the additional units could be produced using existing factory, selling, and administrative capacity. a. Prepare a differential analysis of the proposed sale to Maple Leaf Visual Inc. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter 0. A colon (:) will automatically appear if required

Crystal Displays Inc. recently began production of a new product, flat panel displays, which required the investment of $1,300,000 in assets. The costs of producing and selling 5,000 units of flat panel displays are estimated as follows:

1	Variable costs per unit:
2	Direct materials	$119.00
3	Direct labor	31.00
4	Factory overhead	49.00
5	Selling and administrative expenses	36.00
6	Total variable cost per unit	$235.00
7	Fixed costs:
8	Factory overhead	$248,000.00
9	Selling and administrative expenses	150,000.00

Crystal Displays Inc. is currently considering establishing a selling price for flat panel displays. The president of Crystal Displays has decided to use the cost-plus approach to product pricing and has indicated that the displays must earn a 12% return on invested assets.

6a. Prepare a differential analysis of the proposed sale to Maple Leaf Visual Inc. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter"o". A colon (:) will automatically appear if required. Score: 38/53 Differential Analysis Reject (Alternative 1) or Accept (Alternative 2) Order August 3 Reject Order Differential Effect Alternative 1 (Alternative 2)(Alternative 2) $135,6000 Accept Order on Income 3 Revenues $0.00 $135,600.00 4 Costs: Variable manufacturing costs 6 Income (loss) 0.00 0.00

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