Grouper Company manufactures toasters. For the first 8 months of 2017, the compa

Question

Grouper Company manufactures toasters. For the first 8 months of 2017, 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 77% variable and 23% fixed.

In September, Grouper receives a special order for 21,100 toasters at $8.04 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.

(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. If amount decreases net income then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

(b) Should Grouper accept the special order?

Sales (350,800 units) $4,374,000 Cost of goods sold 2,606,000 Gross profit 1,768,000 Operating expenses 841,000 Net income $927,000

Explanation / Answer

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. If amount decreases net income then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

b) Grouper should accept the special order

Reject order Accet order Net income increase (decrease) Sales 0 21100*8.04=169644 169644 Cost of goods sold 0 (105020) (105020) Operating expenses 0 (42050) (42050) Net income 0 22574 22574

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