Exercise 20-3 (Part Level Submission) Leno Company manufactures toasters. For th

Question

Exercise 20-3 (Part Level Submission) Leno Company manufactures toasters. For the first 8 months of 2014, the company reported the following operating results while operating at 75% of plant capacity:

Cost of goods sold was 75% variable and 25% fixed; operating expenses were 80% variable and 20% fixed.

In September, Leno Company receives a special order for 19,200 toasters at $8.1 each from Centro Company of Ciudad Juarez. Acceptance of the order would result in an additional $3,000 of shipping costs but no increase in fixed operating expenses.

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).)

Sales (350,300 units) $4,381,500 Cost of goods sold 2,592,000 Gross profit 1,789,500 Operating expenses 839,400 Net income $950,100

Explanation / Answer

Ans)

Statement of cost Unit 350300 Unit 19200@8.1 Sale 4381500 155520 A) Total 4381500 155520 Less Cost of good sold Variable 75% 1944000 106551 Working 1944000/350300*19200 Fixed 25% 648000 648000 106550.9563 B) Total 2592000 754551 C) Gross profit (A-B) 1789500 -599031 Less Opearting Exp Variable 671520 36806 Working 671520/350300*19200 Fixed 167880 167880 36806.12047 Shipping Cost 3000 D) Total 839400 207686 Net profit/loss C-D 950100 -806717 Decision Offer not acceptable because there is high fixed cost.Due to this suffer to heavy loss with amounting 806717

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