E7-3 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 (350,000 units) $4,375,000
Cost of goods sold 2,600,000
Gross profit 1,775,000
Operating expenses 840,000
Net income $
935,000
Cost of goods sold was 70% variable and 30% fixed; operating
expenses were 80% variable and 20% fixed.
In September, Moonbeam Company receives a special order for
15,000 toasters at $7.60 each from Luna Company of Ciudad Juarez. Acceptance of
the order would result in an additional $3,000 of shipping costs but no
increase in fixed operating expenses.
Instructions
(a) Prepare an incremental analysis for the special order.
(b) Should Moonbeam Company accept the special order? Why or why
not?(a) Prepare an incremental analysis for the special order.
TUTORIAL PREVIEW
(a)
|
|
Reject
Order
|
|
Accept
Order
|
|
Net
Income
Increase
(Decrease)
|
|
|
|
|
|
|
|
|
Revenues (15,000 X
$7.60)
Cost of goods sold
Operating expenses
Net income
|
$0
0
0
$0
|
|
$114,000
78,000
31,800
$ 4,200
|
(1)
(2)
|
$114,000
(78,000)
(31,800)
$ 8,250
|
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