Diamond Boot Factory normally sells its specialty boots for $33 a pair. An offer to buy 55 pairs of boots for $25 per pair was made by an organization hosting a national event in Norfolk. The variable cost per boot is $12, 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 organization.

Should Diamond Boot Factory accept or reject the special offer?

To determine the differential income or loss per pair of boots, we need to compare the revenue from the special offer to the variable cost per boot, including the additional cost for special stitching.

Revenue per pair of boots from the special offer: $25

Variable cost per boot (including special stitching): $12 + $2 = $14

Differential income or loss per pair of boots = Revenue per pair - Variable cost per pair

= $25 - $14

= $11

Based on this calculation, Diamond Boot Factory would have a differential income of $11 per pair of boots if they accept the special offer. However, since the normal selling price per pair is $33, the company would incur a loss of $22 per pair by accepting the special offer.

Therefore, Diamond Boot Factory should reject the special offer because accepting it would result in a significant loss compared to their normal selling price.

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