Question

PLEASE HELP!

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 (350,800 units) Cost of goods sold Gross profit Operating expenses Net income $4,374,000 2.606,000 1.768,000 841,000 $927.000 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 21,100 toasters at $8.04 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 Reinet Accept Order Accept Net Income Increase (Decrease) Revenues Cost of goods sold Operating expenses Net income (b) Should Moonbeam Company accept the special order? Moonbeam Company the special order: Click if you would like to Show Work for this question: Open Show Work

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 (350,800 units)		$4,374,000
Cost of goods sold		2,606,000
Gross profit		1,768,000
Operating expenses		841,000
Net income		$927,000

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 21,100 toasters at $8.04 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		$		$		$
Cost of goods sold
Operating expenses
Net income		$		$		$

(b)

Should Moonbeam Company accept the special order?

Moonbeam Company should acceptshould reject the special order.

Answer 1

a.

	reject order	accept order	net income increase (decrease)
revenues (21,100*$8.04)	0	169,644	169,644
cost of goods sold (21,100*4.9773)	0	(105,021)	(105,021)
operating expenses (1.8460*21,100)+3100 shipping	0	(42,051)	(42,051)
net income	0	22,572	22,572

b.should moonbeam company accept the special order?.

Yes.

working:

variable cost of goods sold per unit = (2,606,000*67%/350,800 units)

=>4.9773 per unit.

operating expenses per unit = (841,000*77%) / 350,800

=>$1.8460 per unit.