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: Cost of goods sold was 77% variable and 23% fixed; operating expenses were 87% variable and 13% fixed. In September, Moonbeam Company receives a special order for 21,600 toasters at $ 8.12 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).)

Explanation / Answer

Reject Accept Net Income Order Order Increase /(Decrease) Revenues 0 175392 175392 (21600*8.12) Cost of goods sold 123300* -123300 Operating expenses 48244** -48244 Net income $ 3848 3848 Cost of Goods Sold: Variable cost: 2591000 X .77 = 1995070 Variable cost per unit = 1995070 /349500= 5.7084 COGS = 5.7084*21600 =123300* Operating Expenses: Variable cost: 840300*0.87 = 731061 Per unit =731061/349500 = $2.09 2.09 X 21600 = 45144+ 3100 (shipping)=48244**

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