Gruden Company produces golf discs which it normally sells to retailers for $7.19 each. The cost...
Question:
Gruden Company produces golf discs which it normally sells to retailers for $7.19 each. The cost of manufacturing 23,400 golf discs is:
| Materials | $12,402 |
| Labor | 34,398 |
| Variable overhead | 22,698 |
| Fixed overhead | 46,800 |
| Total | $116,298 |
Gruden also incurs 4% sales commission ($0.29) on each disc sold.
McGee Corporation offers Gruden $5 per disc for 4,900 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 $46,800 to $51,748 due to the purchase of a new imprinting machine.
No sales commission will result from the special order.
a. Prepare an incremental analysis for the special order. (Round answers to 0 decimal places, e.g. 1250. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Incremental Analysis:
Incremental analysis is used in managerial decision-making strategy. In an incremental analysis, only relevant costs, that is the costs that are incremental to the alterative,
are included.
Answer and Explanation: 1
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a.
Grunden Company
Incremental Analysis of a special order
| Revenue | $24,500 ($5 x 4,900 disks) |
| Costs: | |
| Direct materials | 2,597 ($12,402 x... |
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