Leno Company manufactures toasters. For the first 8 months of 2014, the company

Question

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:
Sales (351,800 units) $4,379,500 Cost of goods sold 2,595,000 Gross profit 1,784,500 Operating expenses 839,100 Net income $945,400
Cost of goods sold was 67% variable and 33% fixed; operating expenses were 72% variable and 28% fixed.

In September, Leno Company receives a special order for 18,800 toasters at $7.5 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.

Explanation / Answer

Variable COGS per unit = 2595000 * 67% / 351800 = $4.94

Variable operating expenses per unit = 839100 * 72% / 351800 = $1.71

incremental analysis for the special order:

Should accept the new order.

Reject order accept order net income increase or decrease Revenue(18800 units) 141000 141000 0 Cost of Goods sold 138556 92872 (45684) Operating expenses 47744 32148+3000 = 35148 (12596) Net Income - 45300 +12980 + 58280

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