Question

each. The cost omenacturing 20,000 golf discsi Bercise 20-02-b (Video) Gruden Company produces golfes which it normally sells to retailers for Materials $10,000 30,000 Variable overhead 20,000 Fixed overhead 40,000 Total $100,000 Labor Gruden also incurs 5% sales commission (50.35) on each disc sold McGee Corporation offers Gruden 54.80 per for 5.000 do Mew the dieses under own brand name in foreign markets not yet served by Gruden fed overhead will increase from $40,000 to $46,000 due to the purchase of new imprinting machine. Nosales commission will result from the special order Gruden co the offer Prepare an incremental analysis for the special order. (Entegrativamente using the negative in preceding the number 45 or parentheses Reject Order Accept Order Net Incom Increase (Decrease Variable overhead 2000-2020. W Adivin

Answer 1

Answer:

(a) Incremental Analysis for the Special order

Present Sales volume = 20,000 discs

Material price per unit = Total Material cost / No. of units produced = $10,000 / 20,000 = $0.5 per unit

Labor price per unit = Total Labor cost / No. of units produced = $30,000 / 20,000 = $1.5 per unit

Variable Overhead per unit = Total Variable Overhead cost / No. of units produced = $20,000 / 20,000 = $1 per unit

Sales commission per unit = $0.35 per unit (5%)

Fixed cost = $40,000

If we accept the order the revised fixed cost is $46,000 and there will no sales commission on such 5,000 discs

Revised Sales volume will be 25,000 discs

Revenues Materials Labor Varaiable Overhead Fixed Overhead Sales Commission Net Income Net Income Reject Accept Increase Order Order (Decrease) $140,000 $164,000 $24,000 10,000 12,500 2,500 30,000 37,500 7,500 20,000 25,000 5,000 40,000 46,000 6,000 7,000 7,000 $33,000 $40,000 $3,000

(b) Accept

Gruden should accept the Special Order