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:

Sales (349,300 units)		$4,370,000
Cost of goods sold		2,602,000
Gross profit		1,768,000
Operating expenses		839,500
Net income		$928,500

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 24,400 toasters at $8.38 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).)

Reject Order		Accept Order		Net Income Increase (Decrease)
Revenues		0		204472		204472
Cost of goods sold		enter a dollar amount		enter a dollar amount		enter a dollar amount
Operating expenses		enter a dollar amount		enter a dollar amount		enter a dollar amount
Net income		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount

Answer 1

Correct Answer:

The order should be accepted.

	Reject Order	Accept Order	Net Income
			Increase / (Decrese)
Revenues	$                        -	$//img.homeworklib.com/questions/a2c0c6a0-79a2-11ea-b351-51eced0be3bc.gif?x-oss-process=image/resize,w_560$ $                      2,04,472.00	$                      2,04,472.00
Cost of goods sold	$                        -	$//img.homeworklib.com/questions/a2c0c6a0-79a2-11ea-b351-51eced0be3bc.gif?x-oss-process=image/resize,w_560$ $                      1,39,955.96	$                   (1,39,955.96)
Operating expenses	$                        -	$//img.homeworklib.com/questions/a2c0c6a0-79a2-11ea-b351-51eced0be3bc.gif?x-oss-process=image/resize,w_560$ $                         54,117.96	$                       (54,117.96)
Net income	$                        -	$                         10,398.08	$                         10,398.08

Working:

Cost of Goods Sold	$               26,02,000
variable 77%	$               20,03,540
Units	349300
Variable cost per unit	$                     5.7359
Special order unit	24400
Total variable cost for special order	$           1,39,955.96
Total Relevant cost of Goods Sold	$           1,39,955.96

Operating expense	$                 8,39,500
Variable 87%	$                 7,30,365
Units	349300
Variable cost per unit	$                     2.0909
Special order unit	24400
Total variable cost for special order	$               51,017.96
Additional Fixed Cost-Shipping	$                 3,100.00
Total Relevant Operating expenses for Order	$               54,117.96

End of answer.

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