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 (358,400 units)		$4,375,000
Cost of goods sold		2,595,840
Gross profit		1,779,160
Operating expenses		837,760
Net income		$941,400

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 21,700 toasters at $7.97 each from Luna Company of Ciudad Juarez. Acceptance of the order would result in an additional $2,900 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

	Reject order	Accept order	Net income increase(decrease)
Revenues	0	172949	172949
Cost of goods sold	0	-110019	-110019
Operating expesnes	0	-43479	-43479
Net income	0	19451	19451
b
Moonbeam company should accept the special order
Workings:
Per unit:
Cost of goods sold	5.07	=(2595840*70%)/358400
Operating expenses	1.87	=(837760*80%)/358400
Revenues	172949	=21700*7.97
Cost of goods sold	110019	=21700*5.07
Operating expesnes	43479	=(21700*1.87)+2900