Wallway Company manufactures toasters. For the first 8 months of 2002, the company reported the following operating results while operating at 75% of plant capacity:

Cost of goods sold was 70% variable and 30%- fixed; operating expenses were also 70% variable and 30% fixed. In September, Wallway Company receives a special order for 15,000 toasters at \($6.00\) each from Colina Company of Mexico City Acceptance of the order would result in \($3,000\) of shipping costs but no increase in fixed operating expenses.

Instructions

(a) Prepare an incremental analysis for the special order.

(b) Should Wallway Company accept the special order? Why or why not?

Transcribed Image Text:

Sales (437,500 units) $4,375,000 Cost of goods sold 2,500,000 Gross profit 1,875,000 Operating expenses 875,000 Net income $1,000,000