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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 (350,800 units) $4,377,600 Cost of goods sold 2,608,100 Gross profit 1,769,500 Operating expenses 839,000 Net income $930,500

Cost of goods sold was 67% variable and 33% fixed; operating expenses were 72% variable and 28% fixed.

   In September, Leno Company receives a special order for 23,300 toasters at $7.77 each from Centro Company of Ciudad Juarez. Acceptance of the order would result in an additional $3,050 of shipping costs but no increase in fixed operating expenses. 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: Cost of goods sold was 67% variable and 33% fixed; operating expenses were 72% variable and 28% fixed. In September, Leno Company receives a special order for 23,300 toasters at $7.77 each from Centro Company of Ciudad Juarez. Acceptance of the order would result in an additional $3,050 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).)

Explanation / Answer

Sales (350,800 units)$4,377,600

Cost of goods sold 2,608,100 x 67% = 1,747,427 / 350,800 = $4.98 variable cost per unit

Gross profit 1,769,500

Operating expenses 839,000 x 72% =604,080 / 350,800 = $1.72 variable cost per unit

Net income $930,500

Incremental analysis

Revenues = (23,300 x 7.77)

=$181,041

Cost of Goods Sold = (23,300 x 4.98)

=$116,034

Operating Expenses = (23,300 x 1.72) +3050

=$43,126

Net Income = $181,041-$116,034-$43,126

=21,881

Accept Order

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