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 (358,400 units)		$4,374,000
Cost of goods sold		2,600,960
Gross profit		1,773,040
Operating expenses		837,760
Net income		$935,280

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 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.

Reject order Accept order Net income increase(decrease)

Revenues

Cost of Goods Sold

Operating Expenses

Net income

Answer 1

COST SHEET UP TO AUGUST 2020

UNIT=358400 TOTAL COST PER UNIT

SALES    4374000 12.20 (4374000/358400)

COST OF GOOD SLOD 2600960 7.25 (2600960/358400)

GROSS PROFIT 1773040

OPERATING EXPENSES 837760 2.34(837760/358400)

  

NET INCOME $ 935280

ESTIMATED COST SHEET OF 21100 TOASTERS (SEPTEMBER 2020)

UNIT=21100 COST PER UNIT TOTAL     

SALES 8.04 169644 (21100*8.04)

COST OF GOOD SOLD 7.25 152975(21100*7.25)

  

GROSS PROFIT   16669

OPERATING EXPENSES (+3100 SHIPPING CHARGES) 2.33 52263

(21100*2.33=49163+3100)

NET INCOME DECREASES $35594

NET INCOME=16669-52263 = (-35594)  

IF MOONBEAM COMPANY ACCEPT THE OFFER THE NET INCOME DECREASES OF $35594.SO REJECT THE OFFER IS BETTER TO THE COMPANY.