Question

Moonbeam Company manufactures toasters. For the first 8 months of 2020, the company reported the following operating results while operating at 75% of plant capacity: Sales (347,200 units) $4,380,000 Cost of goods sold 2,589,120 Gross profit 1,790,880 Operating expenses 837,620 Net income $953,260 Cost of goods sold was 70% variable and 30% fixed; operating expenses were 80% variable and 20% fixed. In September, Moonbeam receives a special order for 18,300 toasters at $7.67 each from Luna Company of Ciudad Juarez. Acceptance of the order would result in an additional $3,000 of shipping costs but no increase in fixed costs. Prepare an incremental analysis for the special order. (Round computations for per unit cost to 2 decimal places, e.g. 15.25 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 accept the special order? Moonbeam Company the special order.

Answer 1

Moonbeam Company Requirement a Variable cost per unit = Variable Cost of goods sold + Variable operating expenses Number of Units = 0.7 X 2,589,120) +0.8 X 837,620 347200 = 2482480 / 347200 = 7.15 Total Cost for Special Order = $7.15 x 18300 = Total Revenue for Special order = $7.67 x 18300 = Additional cost ( shipping) 130845 140361 3000 Reject Revenue Cost of manufacturing Cost of shipping Net income Accept Net Income 140361 140361 -130845 -130845 -3000 -3000 6516 6516 0 Requirement b Moonbeam should accept the special order because the net income will increase by $6,516