Gruden Company produces golf discs which it normally sells to retailers for $6.9
ID: 2462130 • Letter: G
Question
Gruden Company produces golf discs which it normally sells to retailers for $6.94 each. The cost of manufacturing 22,000 golf discs is below. Gruden also incurs 7% sales commission ($0.49) on each disc sold. McGee Corporation offers Gruden $5 per disc for 4,800 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 $42,900 to $49,217 due to the purchase of a new imprinting machine. No sales commission will result from the special order. Prepare an incremental analysis for the special order. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Materials $12,100 Labor 32,560 Variable overhead 22,880 Fixed overhead 42,900 Total $110,440Explanation / Answer
Statement of Incremental Profit if McGee Corporation order is accepted Particulars Amount Incremental Sales Sales to McGee Corp. (4800 Discs X $5) 24,000 Less: Incremental Costs Materials - (12100 / 22000 discs) X 4800 Discs (2,640) Labor - (32560 / 22000 discs) X 4800 Discs (7,104) Variable Overhead - (22880 / 22000 discs) X 4800 Discs (4,992) Increase in Fixed Overheads - $49217 -$42900 (6,317) (21,053) Incremental Profit / (Loss) 2,947
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