Question

Concord Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 23,100 golf discs is:

Materials		$  12,474
Labor		36,036
Variable overhead		23,562
Fixed overhead		46,431
Total		$118,503

Concord also incurs 5% sales commission ($0.35) on each disc sold.

McGee Corporation offers Gruden $4.80 per disc for 4,500 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Concord. If Concord accepts the offer, its fixed overhead will increase from $46,431 to $52,651 due to the purchase of a new imprinting machine. No sales commission will result from the special order.

(a)

Prepare an incremental analysis for the special order. (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		$		$		$
Materials
Labor
Variable overhead
Fixed overhead
Sales commissions
Net income		$		$		$

(b)

Should Concord accept the special order?

Concord should

reject accept

the special order .

Answer 1

Incremental Analysis - Concord Company
	Reject		Accept		Net Income
	Order		Order		Increase
					(Decrease)
Revenues (4.80*4500)	$0.00		$21,600.00		$21,600.00
Materials (12474/23100)*4500	$0.00		-$2,430.00		-$2,430.00
Labor (36036/23100)*4500	$0.00		-$7,020.00		-$7,020.00
Variable overhead (23562/23100)*4500	$0.00		-$4,590.00		-$4,590.00
Fixed overhead (52651-46431)	$0.00		-$6,220.00		-$6,220.00
Sales commissions	$0.00		$0.00		$0.00
Net income	$0.00		$1,340.00		$1,340.00

Yes Proposal Should be accepted.