Moonbeam Company manufactures toasters. For the first 8 months of 2017, the comp

Question

Moonbeam Company manufactures toasters. For the first 8 months of 2017, the company reported the following operating results while operating at 75% of plant capacity: Sales (349,900 units) $4,373,000 Cost of goods sold 2,602,000 Gross profit 1,771,000 Operating expenses 839,800 Net income $931,200 Cost of goods sold was 74% variable and 26% fixed; operating expenses were 84% variable and 16% fixed. In September, Moonbeam Company receives a special order for 20,800 toasters at $8.48 each from Luna Company of Ciudad Juarez. Acceptance of the order would result in an additional $3,000 of shipping costs but no increase in fixed costs. (a) 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).) Reject Order Accept Order Net Income Increase (Decrease) Revenues $ $ $ Cost of goods sold Operating expenses Net income $ $ $ (b) Should Moonbeam Company accept the special order? Moonbeam Company the special order

Explanation / Answer

(a) Prepare an incremental analysis for the special order

Yes, Moonbeam company should accept the special order.

Incremental revenue (20800*8.48) 176384 Less: Incremental cost Variable cost of goods sold (2602000*74%/349900*20800) (114460.32) Variable operating expenses (839800*84%/349900*20800)+3000 (44934.88) Total incremental cost (159395.20) Incremental profit 16989

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