Wyco Company manufactures toasters. For the first 8 months of 2011, the company

Question

Wyco Company manufactures toasters. For the first 8 months of 2011, the company reported the following operating results while operating at 75% of plant capacity.

SALES (401,630 UNITS) $4,016,300
COST OF GOODS SOLD 2,398,560
GROSS PROFIT 1,617,740
OPERATING EXPENSES 895,590
NET INCOME 722,150

Cost of goods sold was 66% variable and 34% fixed. Operating expenses were also 66% variable and 34% fixed.

In September, Wyco Company receives a special order for 41,000 toasters at $6.60 each from Ortiz Company of Mexico City. Acceptance of the order would result in $8,050 of shipping costs but no increase in fixed operating expenses.

Complete the incremental analysis for the special order. (If an amount is blank enter 0, all boxes must be filled to be correct. If the impact on net income is a decrease use either a negative sign in front of the number, e.g. -45 or parenthesis, e.g. (45). Enter all other amounts as positive amounts and subtract where necessary. Round your answers to 0 decimal places, e.g. 5,210, round your computations of unit costs to 3 decimal places, e.g. 5.525.)

REJECT ORDER ACCEPT ORDER NET INCOME INCREASE (DECREASE)
REVENUES ??? ??? ???
COST OF GOODS SOLD ??? ??? ????
OPERATING EXPENSE ?????? ??? ???
NET INCOME ??? ???? ???

WYCO COMPANY SHOULD ACCEPT/REJECT???? THE ORDER.

Explanation / Answer

                                                    Reject             Accept            Net Income
                                                     Order              Order          Increase/ Decrease
Revenues                      $4,016,300   $4,286,900    $270,600
COGS                            $2,398,560    $2,567,522    $168,962  
Operating Expenses          $895,590       $955,167     $59,577
Net Income                      $722,150      $764,211     $42,061

Workings:
Variable COGS    2,398,560 x 66% = $1,583,050
$1,583,050 / 401,630 = $3.94

401,630 + 41,000 = 442,630 x $3.94   $1,743,962
Fixed COGS $815,510 + $8,050              $823,560
Total Variable COGS                          $2,567,522

Variable Operating Expenses   $895,590 x 66% = $591,089
$591,089 / 401,630   = $1.47

401,630 + 41,000 = 442,630 x $1.47      $650,666
Fixed Operating Exp.$895,590 x 34%      $304,501
Total Fixed Operating Exp.                   $955,167

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