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Chrome File Edit View History Bookmarks People Window Help 6296 C.) Tue 10:53 PM ? Secure | https://edugen.wileyplus.com/edugen/student/rmainfr.uni 01 WileyPLUS Weygandt, Financial & Managerial Accounting, 2e Financial and Managerial Accounting (ACCTG 10 and 11) MESSAGE MY INSTRUCTOR STANDARD VIEW PRINTER VERSION BACK NEXT Exercise 21-2 Gruden Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 23,600 golf discs is: Materials Labor Variable overhead Fixed overhead Total 12,744 36,344 24,308 48,144 $121,540 les Gruden also incurs 7% sales commission ($0.49) on each disc sold McGee Corporation offers Gruden $4.88 per disc for 5,140 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 $48,144 to $52,714 due to the purchase of a new imprinting machine. No sales commission will result from the special order yer 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).) Net Income Increase (Decrease) PM Reject Order Accept Order Revenues Materials Labor Variable overhead Fixed overhead Sales commissions Net income PM

Explanation / Answer

Ans.a Incremental Analysis Reject Accept Net income order order Inc/ dec. Revenues 0 25083 25083 Materials 0 2776 -2776 Labor 0 7916 -7916 Variable overhead 0 5294 -5294 Fixed overhead 0 4570 -4570 Sales commissions 0 0 0 Net income 0 4528 4528 *Calculation: Incremental Analysis Reject Accept Net income order order Inc/ dec. Revenues (4.88 * 5140) 0 25083.2 25083.2 Materials (12744 / 23600 * 5140) 0 2775.6 -2775.6 Labor (36344 / 23600 * 5140) 0 7915.6 -7915.6 Variable overhead (24308 / 23600 * 5140) 0 5294.2 -5294.2 Fixed overhead (52714 - 48144) 0 4570 -4570 Sales commissions 0 0 0 Net income 0 4527.8 4527.8 Ans.b Gruden should accept the special order because it will increase its net income.

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