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

Materials

Cuurent cost Details Reject Spl Order Accept special order Increase in net opearting income Details Amt/unit Total Amt Amt/unit Total Amt Units produced             24,800         24,800 special order           5,400               30,200 Income statement Revenue                  6.85       169,880             6.85      169,880.00 Revenue spl order 0             5.00               27,000 Total Revenue       169,880      196,880.00

Materials

                 0.54          13,392             0.54         16,308.00 Labor                  1.45          35,960             1.45         43,790.00 Variable overhead                  0.99          24,552             0.99         29,898.00 Sales Commission                  0.48          11,892 0 Contribution                  3.46          84,084      106,884.00 Fixed overhead          50,096               56,243 Net opearting Income          33,988         50,641.00     16,652.60 Gruden should accept the order as net opearting income is increasing

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