Question

oonbeam 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 (350,200 units)		$4,380,000
Cost of goods sold		2,597,000
Gross profit		1,783,000
Operating expenses		839,000
Net income		$944,000

Cost of goods sold was 76% variable and 24% fixed; operating expenses were 86% variable and 14% fixed.

In September, Moonbeam Company receives a special order for 20,500 toasters at $7.68 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 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 acceptshould reject the special order.

Answer 1

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		20500*7.68 = 157440		157440
Cost of goods sold		0		20500*5.6360 = -115538		-115538
Operating expenses		0		20500*2.0604+3000 = -45238		-45238
Net income		0		-3336		-3336

(b)

Should Moonbeam Company accept the special order?

Moonbeam Company should reject the special order.