Question

Moonbeam Company manufactures toasters. For the first 8 months of 2017, the company reported the following operating results while operating at 75% of plant capacity:

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

Cost of goods sold was 67% variable and 33% fixed; operating expenses were 77% variable and 23% fixed.

In September, Moonbeam Company 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. 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 a dollar amount		$ enter a dollar amount		$ enter a dollar amount
Cost of goods sold		enter a dollar amount		enter a dollar amount		enter a dollar amount
Operating expenses		enter a dollar amount		enter a dollar amount		enter a dollar amount
Net income		$ enter a dollar amount		$ enter a dollar amount		$ enter a dollar amount

(b)

Should Moonbeam Company accept the special order?

Moonbeam Company select an optionselect an option   should accept  should reject  the special order.

Answer 1

Moonbeam Company
Prepare an incremental analysis for the special order.
Sales (350,800 units)	4374000
Cost of goods sold	$2,606,000 x 67% = 1,746,020 / 350800 = $4.98 variable cost per unit
Gross Profit	1768000
Operating expenses	$841,000 x 77% = 647,570 = $1.85 variable cost per unit
Net income	927000
Revenues	21100 x 8.04 = 169644
Cost of goods sold	21100 x 4.98 = 105078
Operating expenses	21100 x 1.85 = 39035 + 3100 = 42135
Net income	22431
Should Moonbeam Company accept the special order?
Moonbeam should accept the special order. This is because the special order results
in an increase in net income.