Cronulla Sportswear Company Manufactures Socks

question 137

Essay

Cronulla Sportswear Company manufactures socks.The Athletic Division sells its socks for $6 a pair to outsiders.Socks have manufacturing costs of $2.50 per pair for variable and $1.50 for fixed.The division's total fixed manufacturing costs are $105 000 at the normal volume of 70 000 units.
The New Zealand Division has offered to buy 15 000 pairs of socks at the full cost of $4.The Athletic Division has excess capacity and the 15 000 pairs can be produced without interfering with the current outside sales of 70 000.The 85 000 volume is within the division's relevant operating range.
Explain whether the Athletic Division should accept the offer.
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Definitions:

Reagent Strips

Thin strips used for chemical analysis or testing, commonly in urine tests, to detect substances or changes in the body.

Chemical Properties

Characteristics of a substance that become evident during or after a chemical reaction, such as flammability, toxicity, pH, and reactivity with other chemicals.

Clean-Voided Urine

Urine collected midstream during urination to minimize contamination from the external genitalia.

Perineal Area

The region between the anus and the genitals, which is important for maintaining cleanliness to prevent infection.