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 (347,200 units)		$4,380,000
Cost of goods sold		2,589,120
Gross profit		1,790,880
Operating expenses		837,620
Net income		$953,260

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 20,200 toasters at $8.09 each from Luna Company of Ciudad Juarez. Acceptance of the order would result in an additional $3,000 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).)

		enter revenues in dollars		enter revenues in dollars		enter revenues in dollars
		enter the cost of goods sold in dollars		enter the cost of goods sold in dollars		enter the cost of goods sold in dollars
		enter operating expenses in dollars		enter operating expenses in dollars		enter operating expenses in dollars
		enter net income in dollars		enter net income in dollars		enter net income in dollars

(b)

Should Moonbeam accept the special order?

select an option                                                          should rejectshould accept

Answer 1

	Reject order	Accept order	Net income increase(decrease)
Revenues	0	163418	163418
Cost of goods sold	0	-105444	-105444
Operating expenses	0	-41986	-41986
Net income	0	15988	15988
Moonbeam company should accept the special order
Workings:
Per unit:
Cost of goods sold	5.22	=(2589120*70%)/347200
Operating expenses	1.93	=(837620*80%)/347200
Revenues	163418	=20200*8.09
Cost of goods sold	105444	=20200*5.22
Operating expenses	41986	=(20200*1.93)+3000