Exercise 20-3 Moonbeam Company manufactures toasters. For the first 8 months of

Question

Exercise 20-3 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 (349,100 units) $4,377,000 Cost of goods sold Gross profit Operating expenses Net income 2,594,000 1,783,000 839,400 $943,600 Cost of goods sold was 67% variable and 33% fixed; operating expenses were 77% variable and 23% fixed In September, Moonbeam Company receives a special order for 24,500 toasters at $8.38 each from Luna Company of Ciudad Juarez. Acceptance of the order would result in an additional $2,900 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 Cost of goods sold Operating expenses Net income Should Moonbeam Company accept the special order?

Explanation / Answer

Variable Cost of goods sold = (2594000*67%)/349100= 4.9785 Variable operting expense = (839400*77%)/349100= 1.8514 Reject order Accept order Net income(decrease) Revenues 0 205310 205310 Cost of goods sold 0 121973 -121973 Operating expenses 0 45359 -45359 Net income 0 37978 37978 b Yes, special order should be accpeted Note:Costs can be written using a negative sign

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