Exercise 20-3 Moonbeam Company manufactures toasters. For the first 8 months of

Question

Exercise 20-3 Moonbeam Company manufactures toasters. For the first 8 months of 2017, the company reported the following operating results while operating at 759 of plant capacity: Sales (350,300 units) Cost of goods sold Gross profit Operating expenses Net income $4,372,000 2,601,000 1,771,000 839,500 $931,500 Cost of goods sold was 68% variable and 32% fixed; operating expenses were 78% variable and 22% fixed. In September, Moonbeam Company receives a special order for 21,800 toasters at $7.80 each from Luna Company of Ciudad Juarez. Acceptance of the order would result in an additional $3,100 of shipping costs but no increase in fixed costs 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

a Sales (350,300 units)                   4,372,000 Cost of goods sold 2,601,000 x 68%                   1,768,680 1768680/350300 5.05 Variale Cost Per Unit Gross Profit                   2,603,320 Operating expenses 839500*78%                       654,810           1.87 Variale Cost Per Unit Net income                   1,948,510 revenues 21800*7.8    170,040 Cost of goods sold 21800*5.05    110,090 Operating Expenses 21800*1.87+3100      43,866 Net Income      16,084 b Moonbeam should accept the special order. This is because the special order results in an increase in net income.

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