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 (336,000 units)		$4,377,000
Cost of goods sold		2,592,000
Gross profit		1,785,000
Operating expenses		840,000
Net income		$945,000

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 21,600 toasters at $8.12 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 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                                                          should rejectshould accept the special order.

Answer 1

(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		0		175392		175392
Cost of goods sold		0		-116640		-116640
Operating expenses		0		-46300		-46300
Net income		0		12452		12452

(b)

Should Moonbeam accept the special order?

Yes, Moonbeam Company should accept the special order.