Prepare an incremental analysis for the special order. (Enter negative amounts u

Question

Prepare an incremental analysis for the special order. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Gruden Company produces golf discs which it normally sells to retailers for $6.85 each. The cost of manufacturing 24,800 golf discs is: Materials $13,392 Labor 35,960 Variable overhead 24,552 Fixed overhead 50,096 Total $124,000

Gruden also incurs 7% sales commission ($0.48) on each disc sold.

   McGee Corporation offers Gruden $5 per disc for 5,400 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Gruden. If Gruden accepts the offer, its fixed overhead will increase from $50,096 to $56,243 due to the purchase of a new imprinting machine. No sales commission will result from the special order.

Explanation / Answer

yes,There is a incremental income of $ 4761

Per unit cost Reject order Accept order Increase/(Decrease) Revenue 0 27000 (5*5400) 27000 Material 13392/24800 = .54 0 -2916   (.54*5400) - 2916 Labor 35960/24800 = 1.45 0 -7830    [1.4*5400] -7830 Variable overhead 24552/24800 = .99 0 -5346    [.99*5400] -5346 Fixed overhead 0 -6147       [56243-50096] -6147 Sales commission 0 0 0 Net income 0 4761 4761

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