Question

Moonbeam Company manufactures toasters. For the first 8 months of 2020, the company reported the following operating results while operating at 75% of plant capacity: Sales (341,600 units) $4,370,000 Cost of goods sold 2,591,280 Gross profit 1,778,720 Operating expenses 836,920 Net income $941,800 Cost of goods sold was 70% variable and 30% fixed; operating expenses were 80% variable and 20% fixed. In September, Moonbeam receives a special order for 15,000 toasters at $7.50 each from Luna Company of Ciudad Juarez. Acceptance of the order would result in an additional $2,900 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 2 decimal places, e.g. 15.25 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 $enter revenues in dollars $enter revenues in dollars $enter revenues in dollars Cost of goods sold enter the cost of goods sold in dollars enter the cost of goods sold in dollars enter the cost of goods sold in dollars Operating expenses enter operating expenses in dollars enter operating expenses in dollars enter operating expenses in dollars Net income $enter net income in dollars $enter net income in dollars $enter net income in dollars (b) Should Moonbeam accept the special order? Moonbeam Company select an option the special order.

Answer 1

	Reject order	Accept order	Net income increase(decrease)
Revenues	0	112500	112500
Cost of goods sold	0	-79650	-79650
Operating expenses	0	-32300	-32300
Net income	0	550	550
Moonbeam company should accept the special order

Workings:
Per unit:
Cost of goods sold	5.31	=(2591280*70%)/341600
Operating expenses	1.96	=(836920*80%)/341600
Revenues	112500	=15000*7.50
Cost of goods sold	79650	=15000*5.31
Operating expenses	32300	=(15000*1.96)+2900