Shandling Company manufactures toasters. For the first 8 months of 2014, the com

ID: 2454474 • Letter: S

Question

Shandling Company manufactures toasters. For the first 8 months of 2014, the company reported the following operating results while operating at 75% of plant capacity:

Sales (350,600 units) $4,375,000
Cost of goods sold 2,610,000
Gross profit 1,765,100
Operating expenses 839,400

Net income $975,700

Cost of goods sold was 65% variable and 35% fixed. Operating expenses were also 70% variable and 30% fixed.

In September, Shandling Company receives a special order for 15,000 toasters at $7.60 each from Ortiz Company of Mexico City. Acceptance of the order would result in $3,000 of shipping costs but no increase in fixed operating expenses.

Prepare an incremental analysis for the special order. (If answer is zero, please enter 0. Do not leave any fields blank. If amount decreases the income, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Enter all amounts in columns "Reject Order" and "Accept Order" as positive amounts and subtract where necessary.)

Reject Order Accept Order Net Income Increase (Decrease)

Revenues $_________ $_________ $_________

Cost of goods sold _________ _________ _________

Operating expense _________ _________ _________

net Income $_________ $_________ $_________

Should leno comonay accept or reject the special order?

Explanation / Answer

Reject Order

Accept Order

Net Income Increase (Decrease)

Revenues

4375000

114000

Cost of Goods Sold

2610000

72582.71

Operating Expense

839400

25138.90

Shipping Cost

------

3000

Net Income

975700

13278.39

13278.39

Company should accept the special order because it will result in an increase in net income of $13278.39