In September, Moonbeam Company receives a special order for 17,500 toasters at $

Question

In September, Moonbeam Company receives a special order for 17,500 toasters at $7.90 each from Luna Company of Ciudad Juarez. Acceptance of the order would result in an additional $3,100 of shipping costs 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. 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 138250 Cost of goods sold 90981 Operating expenses Net income 10,511 Should Moonbeam Company accept the special order? Moonbeam Company Shoulo accept the special order LINK TO TEXT VIDEO: SIMILAR EXERCISE VIDEO: APPLIED SKILLS Question Attempts: 1 of 5 used SAVE FOR LATER SUBMIT ANSWER

Explanation / Answer

Solution: a. Reject Order Accept Order Net Income Increase (Decrease) Revenues 0 138,250 138,250 Cost of goods sold 0 -90,981 -90,981 Operating expenses 0 -36,758 -36,758 Net Income 0 10,511 10,511 Working Notes: Since, due to this special order there will be no increase in fixed cost other than additional shipping cost, Hence for these special order of 17,500 units only variable cost and additional shipping cost will be incurred. Variable Cost of goods sold per unit = Variable Cost of goods sold /Current Number of Units =(2,595,000 x 70%)/349,400 =$5.1989 per unit Variable operating expenses per unit = Variable operating expenses /Current Number of Units =(840,000 x 80%)/349,400 =1.9232970807 =$1.9233 per unit Reject Order Accept Order Net Income Increase (Decrease) Revenues 0 138,250 138,250 [17,500 x $7.90 ] [17,500 x $7.90 ] Cost of goods sold 0 -90,981 -90,981 [17,500 x $5.1989 ] [17,500 x $5.1989 ] Operating expenses 0 -36,758 -36,758 [17,500 x $1.9233 + 3100 shipping cost ] [17,500 x $1.9233 + 3100 shipping cost ] Net Income 0 10,511 10,511 b. Should Accept Working Notes: Since, net income will increase by 10,511 , hence, Moonbeam Company should accept the special order Please feel free to ask if anything about above solution in comment section of the question.

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