leno Company manufactures toasters. For the first 8 months of 2014, the company
ID: 2465644 • Letter: L
Question
leno Company manufactures toasters. For the first 8 months of 2014, the company reported the following operating results while operating at 75% of plant capacity:
Sales (350,700 units)
$4,375,400
Cost of goods sold
2,594,000
Gross profit
1,781,400
Operating expenses
839,100
Net income
$942,300
Cost of goods sold was 71% variable and 29% fixed; operating expenses were 76% variable and 24% fixed.
In September, Leno Company receives a special order for 15,200 toasters at $7.6 each from Centro 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.
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.Enter 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)
Revenues
$
$
$
Cost of goods sold
Operating expenses
Net income
$
$
$
leno Company manufactures toasters. For the first 8 months of 2014, the company reported the following operating results while operating at 75% of plant capacity:
Sales (350,700 units)
$4,375,400
Cost of goods sold
2,594,000
Gross profit
1,781,400
Operating expenses
839,100
Net income
$942,300
Cost of goods sold was 71% variable and 29% fixed; operating expenses were 76% variable and 24% fixed.
In September, Leno Company receives a special order for 15,200 toasters at $7.6 each from Centro 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.
Explanation / Answer
Computation of Fixed and Variable and cost per unit and sales price per unit
Particulars
Amount
Variable
Fixed
Per unit Cost
Cost of Goods Sold
2,594,000
1,841,740
752,260
5.2516
operating Expenses
839,100
637,716
201,384
1.8184
Total Cost
3,433,100
2,479,456
953,644
No of Units
350,700
350,700
350,700
Cost Per unit
42,622
7.0700
Sales
4,375,400
Sales price per Unit
12.4762
Computation of net profit under both alternatives
Accept Order
Particulars
Reject Order
Existig Sales
New Order
Total
Sales In Units
350,700
350,700
15,200
365,900
Sales Price
12.4762
12.4762
7.6000
Sales
4,375,400
4,375,400
115,520
4,490,920
Less: Variable Costs:
Cost of Goods Sold
1,841,740
1,841,740
79,824
1,921,564
operating Expenses
637,716
637,716
27,640
665,356
Total Variable Cost
2,479,456
2,479,456
107,464
2,586,920
Less : Fixed Cost
42,622
42,622
5,765
48,387
Sales Commission
7,596
7,596
Cost of Goods Sold
752,260
752,260
-
752,260
operating Expenses
201,384
201,384
201,384
Total Fixed Cost
953,644
953,644
953,644
Net Income
942,300
942,300
8,056
950,356
Incremental analysis of special order
Particulars
Reject Order
Accept Order
Net income increase(decrease)
Sales
4,375,400
4,490,920
115,520
Cost of Goods Sold
2,594,000
2,673,824
79,824
operating Expenses
839,100
866,740
27,640
Net Income
942,300
950,356
8,056
Particulars
Amount
Variable
Fixed
Per unit Cost
Cost of Goods Sold
2,594,000
1,841,740
752,260
5.2516
operating Expenses
839,100
637,716
201,384
1.8184
Total Cost
3,433,100
2,479,456
953,644
No of Units
350,700
350,700
350,700
Cost Per unit
42,622
7.0700
Sales
4,375,400
Sales price per Unit
12.4762
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