Question
In: Accounting
Parker Manufacturers produces can openers. For the first six months of 2011, the company reported the...
Parker Manufacturers produces can openers. For the first six months of 2011, the company reported the following operating results while operating at 80% of plant capacity.
Sales $4,000,000
Cost of goods sold 2,500,000
Gross profit 1,500,000
Operating expenses 1,000,000
Net income $ 500,000
Cost of goods sold was 70% variable and 30% fixed. Operating expenses were 70% variable and 30% fixed. In September 2011, Parker Manufacturers receives a special order for 15,000 can openers at $7.50 from a foreign company. The can openers normally sell for $8.00. Acceptance of the special order would result in $5,000 of shipping costs but no increase in fixed operating expenses.
Instructions
Prepare an incremental analysis for the special order.
Solutions
Expert Solution
given data
sales = 4000000
cost of goods sold = 2500000
operating expenses = 1000000
variable cost = 70%
that is 2500000 * 70% = 1750000
variable operating expenses = 70%
that is 1000000 * 70% = 700000
special order
special order = 15000
selling price per unit = $ 8
sales from special order = 15000 * 8 =1200000
fixed cost = 5000
calculation of net income of special order :
| particulars | amount |
| revenue from special order (15000 units * 7.5) | 112500 |
| variable cost : | |
| variable cost from special order (working note 1) | (52500) |
| variable operating expenses from special order (working note 2) | (21000) |
| contribution margin from special ordre (revanue - variable cost) | 39000 |
| fixed costs from special order | (5000) |
| net income from special order (contribution margin - fixed cost) | 34000 |
working note 1
variable costs from special order = variable cost *sales from special order / sales
= 1750000 * 120000 / 4000000
= $ 52500
working note 2
variable operating expenses from special order = variable operating expenses * sales from special order / sales
= 700000 * 120000 / 4000000
= $ 21000
ekkarill92 answered 1 year agoRelated Solutions
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