Moonbeam Company manufactures toasters. For the first 8 months of 2017, the comp

Question

Moonbeam Company manufactures toasters. For the first 8 months of 2017, the company reported the following operating results while operating at 75% of plant capacity: Sales (350,500 units) $4,375,000 Cost of goods sold 2,607,000 Gross profit 1,768,000 Operating expenses 840,000 Net income $928,000 Cost of goods sold was 65% variable and 35% fixed; operating expenses were 75% variable and 25% fixed. In September, Moonbeam Company receives a special order for 23,100 toasters at $7.85 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. (a) 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 $Entry field with correct answer $Entry field with incorrect answer $Entry field with incorrect answer Cost of goods sold Entry field with correct answer Entry field with incorrect answer Entry field with incorrect answer Operating expenses Entry field with correct answer Entry field with incorrect answer now contains modified data Entry field with incorrect answer Net income $Entry field with correct answer $Entry field with incorrect answer $Entry field with incorrect answer (b) Should Moonbeam Company accept the special order? Moonbeam Company Entry field with correct answer the special order.

Explanation / Answer

(a) Prepare an incremental analysis for the special order

Yes, Moonbeam company should accept the special order.

Incremental revenue (23100*7.85) 181335 Less: Incremental cost Variable cost of goods sold (2607000*65%/350500*23100) (111680.76) Variable operating expenses (840000*75%/350500*23100)+3100 (44620.68) Total incremental cost (156301.44) Incremental profit 25034

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