Question

Moonbeam Company manufactures toasters. For the first 8 months of 2020, the company reported the following operating results while operating at 75% of plant capacity:

Sales (341,600 units)		$4,375,000
Cost of goods sold		2,610,800
Gross profit		1,764,200
Operating expenses		841,190
Net income		$923,010

Cost of goods sold was 70% variable and 30% fixed; operating expenses were 80% variable and 20% fixed.

In September, Moonbeam receives a special order for 23,100 toasters at $7.85 each from Luna Company of Ciudad Juarez. Acceptance of the order would result in an additional $3,100 of shipping costs but no increase in fixed costs.

(a)

Prepare an incremental analysis for the special order. (Round computations for per unit cost to 2 decimal places, e.g. 15.25 and all other computations and final answers to the nearest whole dollar, e.g. 5,725. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Answer 1

Answer
	Reject order	Accept order	Net income increase(decrease)
Revenues	0	$                                  181,335	$                                  181,335
Cost of goods sold	0	-$                                 123,585	-$                                 123,585
Operating expesnes	0	-$                                   48,607	-$                                   48,607
Net income	0	$                                      9,143	$                                      9,143
Moonbeam company should accept the special order
Workings:
Per unit:
Cost of goods sold	5.35	(2610800*70%)/341600
Operating expenses	1.97	(841190*80%)/341600
Revenues	$      181,335	23100*7.85
Cost of goods sold	$      123,585	23100*5.35
Operating expesnes	$        48,607	(23100*1.97)+3100