Gruden Company produces golf discs which it normally sells to retailers for $6.90 each. The cost...
Question:
Gruden Company produces golf discs which it normally sells to retailers for $6.90 each. The cost of manufacturing 19,900 golf discs is:
| Materials | $10,348 |
| Labor | 31,243 |
| Variable overhead | 20,696 |
| Fixed overhead | 40,397 |
| Total | $102,684 |
Gruden also incurs 4% sales commission ($0.28) on each disc sold.
McGee Corporation offers Gruden $5 per disc for 5,000 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 $40,397 to $46,700 due to the purchase of a new imprinting machine. No sales commission will result from a special order.
Prepare an incremental analysis for the special order.
What Is An Incremental Analysis:
The Incremental Analysis tool is used by management in order to decide if the company should accept or reject a special order offer. The Incremental Analysis involves assessing the revenues and costs that will actually change if an order is accepted.
Answer and Explanation: 1
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View this answerIncremental Revenue:
Extra sales =5*5,000
=$25,000
Incremental costs:
1. Variable costs:
= Total variable costs excluding commission * 5,000 /...
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