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).)

Question

Business

Melissa Blake

11 January, 14:28

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).)

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Answers (1)

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Deborah Harmon · Answer 1

Increase in income = $10,550

Explanation:

Giving the following information:

Sales (349,400 units) $ 4,372,000

Cost of goods sold 2,595,000 (70% variable)

Gross profit 1,777,000

Operating expenses 840,000 (80% variable)

Net income $937,000

Moonbeam Company receives a special order for 17,500 toasters at $7.90 each. Acceptance of the order would result in an additional $3,100 of shipping costs.

Variable cost per unit = (2,595,000*0.70) / 349,400 = 5.20

Variable opetating expense = (840,000*0.80) / 349,400 = 1.92

Increase in sales = 7.90*17500 = 138,250

COGS = (5.2*17500) = 91,000

Gross profit = 47,250

Variable operating expense = (1.92*17,500) + 3100 = 36,700

Increase in income = $10,550