Question

In: Accounting

Moonbeam Company manufactures toasters. For the first 8 months of 2017, the company reported the following...

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

Solutions

Expert Solution

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

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