Question

Exercise 7-3 (Video)

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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 18,300 toasters at $7.67 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).)

		Reject Order		Accept Order		Net Income Increase (Decrease)
Revenues		$		$		$
Cost of goods sold
Operating expenses
Net income		$		$		$

(b)

Should Moonbeam accept the special order?

Moonbeam Company

should acceptshould reject

the special order.

Answer 1