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 (349,400 units)		$4,372,000
Cost of goods sold		2,595,000
Gross profit		1,777,000
Operating expenses		840,000
Net income		$937,000

Cost of goods sold was 70% variable and 30% fixed; operating expenses were 80% variable and 20% fixed.

In September, Moonbeam Company receives a special order for 17,500 toasters at $7.90 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 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 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		0		138250		138250
Cost of goods sold		0		-90981		-90981
Operating expenses		0		-36756		-36756
Net income		0		10513		10513

(b)

Should Moonbeam Company accept the special order?

Yes, Moonbeam Company should accept the special order.