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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 (350,800 units) $4,377,600 Cost of goods sold 2,608,100 Gross profit 1,769,500 Operating expenses 839,000 Net income $930,500

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 23,300 toasters at $7.77 each from Centro Company of Ciudad Juarez. Acceptance of the order would result in an additional $3,050 of shipping costs but no increase in fixed operating expenses. 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 67% variable and 33% fixed; operating expenses were 72% variable and 28% fixed. In September, Leno Company receives a special order for 23,300 toasters at $7.77 each from Centro Company of Ciudad Juarez. Acceptance of the order would result in an additional $3,050 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).)

Explanation / Answer

Following will be the calculation for your answer:

Ref Cost of goods sold Operating expenses Total @ 75% capacity        2,608,100        839,000 Variable (67% / 72%) A        1,747,427        604,080 Fixed (33% / 28%)           860,673        234,920 Per Unit Variable Cost B = A / 350,800 4.9813 1.7220 New Order Variable Costs C = B X 23,300           116,064           40,123 additional Shipping Cost D = given in Q             3,050 E = C + D           116,064           43,173
With these Figures of Cost of Goods (COGS) and Operating expenses worked out we can claculate the incremental results as follows:

Sales (23,300 units) 181041 Cost of goods sold    116,064 Operating expenses      43,173 Net income      21,804

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