can you help me? GCBelco Manufacturing produces and sells oil filters for $3.20

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can you help me?

GCBelco Manufacturing produces and sells oil filters for $3.20 each. A retailer has offered to purchase 20,000 oil fiters for $1.60 per filter. Of the total manufacturing cost perfilter of $1.90, $1.20 is the variable manufacturing cost per filter. For this special order, GCBelco would have to buy a special stamping machine that costs $7,500 to mark the customer's logo on the special-order oil filters. The machine would be scrapped when the special order is complete. This special order would use manufacturing capacity that would otherwise be idle. No variable nonmanufacturing costs would be incurred by the special order. Regular sales would not be affected by the special order Would you recommend that GCBelco accept the special order under these conditions? Complete the following incremental analysis to help you make your recommendation. (Use parentheses or a minus sign to indicate a decrease in operating income from the special order.) Total Order Incremental Analysis of Special Sales Order Decision Per Unit(20,000 units) Revenue from special order Less variable expense associated with the order Contribution margin Increase (decrease) in operating income from the special order GCBelco accept the special sales order because it will Y operating income

Explanation / Answer

Incremental analysis :

GCBeico should accept the special sales order because it will increase operating income

Per unit Total Revenue from special order 1.60 32000 Less: Variable expense associated with the order Variable cost -1.20 -24000 Contribution margin 8000 Fixed cost -7500 Increase (decrease) in operating income from special order 500

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