Gruden Company produces golf discs which it normally sells to retailers for $7 e

Question

Gruden Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 20,000 golf discs is:

Gruden also incurs 5% sales commission ($0.35) on each disc sold.

   McGee Corporation offers Gruden $4.80 per disc for 5,000 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Gruden. If Gruden accepts the offer, its fixed overhead will increase from $40,000 to $46,000 due to the purchase of a new imprinting machine. No sales commission will result from the special order. Please detail how to do problem

Materials $10,000 Labor 30,000 Variable overhead 20,000 Fixed overhead 40,000 Total $100,000

Explanation / Answer

Units 20000 Per Unit Selling price 7 per unit Sales 20000*7 140000 Cost Material 10000 0.5 Labour 30000 Variable Overhead 20000 Fixed Overheads 40000 Sell. Commission 7000 107000 (140000*5%) Profit 33000 If purchased from outside 5000 discs Unit Price 7

Related Questions

Navigate

• Browse (All)
• Browse G
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.