Question

Return to Blackboard IS Weygandt, Managerial Accounting, Se Help I System Announcements me: 01:58 PM / Remaining: 54 min. CALCULATOR PRINTER VERSION BACK Exercise 181 (Part Level Submission) NEXTH Felter Company produced and sold 50,000 units of product and is operating at 70% of plant capacity. Unit information about its product is as follows: Sale $70 Variable manufacturing cost $45 Fixed manufacturing cost ($500,000 + 50,000) 10 55 Profit per unit $15 The company received a proposal from a foreign company to buy 10,000 units of Felter Company's product for $50 per unit. This is a one-time only order and acceptance of this proposal will not affect the company's regular sales. The president of Felter Company is reluctant to accept the proposal because he is concerned that the company will lose money on the special order. v (a1) Prepare a schedule reflecting an incremental analysis of this proposal. (Enter negative amounts using elther a n parentheses e.g. (45). Do not leave any field blank. Enter o for the amounts.) tive sign preceding the number e 45 or FELTER COMPANY Incremental Analysis Proposal to sell 10,000 units at $50 Net Income Increase (Decrease) Accept Order Reject Order Open Show Work Click if you would like to Show Work for this question: SUBMIT ANSWwER SAVE FOR LATER Attempts: 0 of 1 used MacBook

Answer 1

Answer:

FELTER COMPANY
Incremental Analysis
Proposal to sell 10,000 units at $50
	Reject Order	Accept Order	Net income Increase(decrease)
Revenues	$3,500,000	$4,000,000	$500,000
Costs	$2,250,000	$2,700,000	($450,000)
Net income	$1,250,000	$1,300,000	$50,000

Analysis: Felter company can accept this proposal as net income is to be increased.

Calculations:

	Reject Order	Accept Order
Revenues
[50,000 x $70]	$3,500,000
[50,000 x $70]+[10,000 x $50]		$4,000,000
Costs
[50,000 x $45]	$2,250,000
[50,000 x $45]+[10,000 x $45]		$2,700,000

Both revenues and variable costs will change due to increase in sales units. But fixed costs do not change.

Hence, taken variable costs only.