cure https://edugen.wileyplus.com/edugen/student/mainfr.uni Kimmel, Accounting,

Question

cure https://edugen.wileyplus.com/edugen/student/mainfr.uni Kimmel, Accounting, 6e PRIN. OF ACCT I8 BACK Exercise 20-2 Gruden Company produces golf discs which it normally sells to rotailers for $7 each. The cost of manufacturing 23,600 golf discs is s 12,744 36,344 24,309 48,144 $121,540 Materials Fixed averhead Total Gruden also incurs 7% sales commission ($0.49) on each disc sold. McGee Corporation offers Gruden $4.88 per disc for 5,140 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Gruden. IE Gruden accepts the offer, its foxed overhead will increase from $48,144 to $52.714 due to the purchase of a new imprinting machine, No sales commission will result from the special arder Prepare an incremental analysis for the special order. (Round ansiwers to O decimal places, o.g. 1250. Enter negative amounts using either a negative sign preceding the number e-g. 43 or parentheses e-g. (43).) Reject Order AcceptNet I Order (Decrease) Revenues Materials Labor Variable overhesd Fixed overhead Sales Net income Should Gruden accept the special order? Gruden should the special erder

Explanation / Answer

Answer a Incremental analysis of special order (5140 discs) Reject Order Accept order Net Income Increase / (Decrease) Revenues $35,980.00 $35,980.00 Materials $2,775.60 Labor $7,915.60 Variable Overhead $5,294.20 Fixed Overhead $0.00 $4,570.00 Sales Commissions $2,518.60 Purchase cost $25,083.20 Net Income $17,476.00 $6,326.80 -$11,149.20 Material cost per golf disc = $12744 / 23600 golf discs = $0.54 per golf disc Labor cost per golf disc = $36344 / 23600 golf discs = $1.54 per golf disc Variable overhead per golf disc = $24308 / 23600 golf discs = $1.03 per golf disc Answer b Gruden should not accept the special order as net income will fall by $11149.20 if order is accepted.

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