Gruden Company produces golf discs which it normally sells to retailers for $7 each. The cost of...


Gruden Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 17,000 golf discs is:

Materials 9,180
Labor 24,990
Variable overhead 17,850
Fixed overhead 34,340
Total $86,360

Gruden also incurs 6% sales commission ($0.42) on each disc sold. McGee Corporation offers Gruden $4.95 per disc for 5,570 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 $34,340 to $38,930 due to the purchase new imprinting machine. No sales commission will result from the special order.

Prepare an incremental analysis for the special order (Round answers to 0 decimal places, e.g., 1250. Record negative amounts using either a negative sign preceding the number e.g., -45 or parentheses e.g. (45).)

Reject Order Accept Order Net Income
Variable overhead
Fixed overhead
Sales commissions
Net income

Incremental Analysis:

It is a management decision making technique in which the relevant financial data is estimated for different alternatives. The relevant financial data is calculated for revenues and expenses for each of the alternative. It can be used for different business situations like accepting or rejecting special price order.

Answer and Explanation: 1

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The following information of Gruden Company is given as under

  • The sales price per unit is $7 per unit to normal customers
  • The current operating...

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Incremental Analysis: Definition & Examples


Chapter 9 / Lesson 7

Learn about incremental analysis. Understand what incremental analysis is, learn the applications of incremental analysis, and see examples of incremental analysis.

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