Exercise 20-2 Gruden Company produces golf discs which it normally sells to reta
ID: 2462204 • Letter: E
Question
Exercise 20-2
Gruden Company produces golf discs which it normally sells to retailers for $6.96 each. The cost of manufacturing 19,000 golf discs is:
Gruden also incurs 4% sales commission ($0.28) on each disc sold.
McGee Corporation offers Gruden $5 per disc for 5,800 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Gruden. If Gruden accepts the offer, its fixed overhead will increase from $37,430 to $43,345 due to the purchase of a new imprinting machine. No sales commission will result from the special order.
Prepare an incremental analysis for the special order. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Should Gruden accept the special order?
Materials $10,260 Labor 30,400 Variable overhead 18,430 Fixed overhead 37,430 Total $96,520Explanation / Answer
Reject order accept order net income increase/decrease units 19000 24800 5800 Revenues 132240 161240 29000 Material (10260) (13392) (3132) labor (30400) (39680) (9280) variable overhead (18430) (24056) (5626) fixed Overhead (37430) (43345) (5915) sales commission (5320) (5320) 0 Net Income 30400 35447 5047 Gruden should accept the order , because the overall profit would increase
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.