In: Accounting
Moonbeam Company manufactures toasters. For the first 8 months
of 2017, the company reported the following operating results while
operating at 75% of plant capacity:
Sales (349,300 units) | $4,370,000 | ||
Cost of goods sold | 2,602,000 | ||
Gross profit | 1,768,000 | ||
Operating expenses | 839,500 | ||
Net income | $928,500 |
Cost of goods sold was 77% variable and 23% fixed; operating
expenses were 87% variable and 13% fixed.
In September, Moonbeam Company receives a special order for 24,400
toasters at $8.38 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 4 decimal
places, e.g. 15.2500 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).)
Reject Order |
Accept Order |
Net Income Increase (Decrease) |
|||||
---|---|---|---|---|---|---|---|
Revenues | |||||||
Cost of goods sold | |||||||
Operating expenses | |||||||
Net income |
Answer | |||
a |
|||
Reject order | Accept order | Net income increase(decrease) | |
Revenues | 0 | $ 204,472 | $ 204,472 |
Cost of goods sold | 0 | -$ 139,956 | -$ 139,956 |
Operating expenses | 0 | -$ 54,118 | -$ 54,118 |
Net income | 0 | $ 10,398 | $ 10,398 |
b | |||
Moonbeam company should accept the special order | |||
Workings: | |||
Per unit: | |||
Cost of goods sold | 5.7359 | (2602000*77%)/349300 | |
Operating expenses | 2.0909 | (839500*87%)/349300 | |
Revenues | $ 204,472 | 24400*8.38 | |
Cost of goods sold | $ 139,956 | 24400*5.7359 | |
Operating expesnes | $ 54,118 | (24400*2.0909)+3100 | |