Exercise 7-3 Moonbeam Company manufactures toasters. For the first 8 months of 2

Question

Exercise 7-3 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 (350,300 units) Cost of goods sold Gross profit Operating expenses Net income $4,372,000 2,601,000 1,771,000 839,500 $931,500 Cost of goods sold was 68% variable and 32% fixed; operating expenses were 78% variable and 22% fixed. In September, Moonbeam Company receives a special order for 21,800 toasters at $7.80 each from Luna Company of Ciudad Juarez. Acceptance of the order would result in an additional $3,100 of shipping co but no increase in fixed costs. 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. Fnter 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) Cost of goods sold Operating expenses Net income

Explanation / Answer

a) Prepare incremental analysis :

b) Moonbeam company should accept the special order

Reject order Accept order Net income increase (decrease) Revenues 0 170040 170040 Cost of goods sold 0 -110069 -110069 Operating expense 0 -43850 -43850 Net income 0 16121 16121

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