Question

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 (349,300 units)		$4,370,000
Cost of goods sold		2,602,000
Gross profit		1,768,000
Operating expenses		839,500
Net income		$928,500

Cost of goods sold was 77% variable and 23% fixed; operating expenses were 87% variable and 13% fixed.

In September, Moonbeam Company receives a special order for 24,400 toasters at $8.38 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).)

		Reject Order		Accept Order		Net Income Increase (Decrease)
Revenues		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
Cost of goods sold		enter a dollar amount		enter a dollar amount		enter a dollar amount
Operating expenses		enter a dollar amount		enter a dollar amount		enter a dollar amount
Net income		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount

(b)

Should Moonbeam Company accept the special order?

Moonbeam Company select an option                                                          should acceptshould reject the special order.

Answer 1

Answer- a)- Net income from special order= $10398.

Explanation- Variable cost of goods sold per unit = ($2602000*77%)/349300 units

= $2003540/349300 units

= $5.7359 per unit

Variable operating expenses per unit = ($839500*87%)/349300 units

= $730365/349300 units

= $2.0909 per unit

- Net income from special order = 24400 units*{$8.38 per unit)-$5.7359 per unit+$2.0909 per unit)-$3100

= $13498-$3100

= $10398

b)- Moonbeam Company should accept the special order due to incremental profit of $10398.