Question
ABC Company manufactures coffee makers. For the first eight months of 2020, the company reported the following operating results while operating at 72% of plant
ABC Company manufactures coffee makers. For the first eight months of 2020, the company reported the following operating results while operating at 72% of plant capacity:
Sales (500,000 units) $75,000,000
Cost of goods sold 42,000,000
Gross profit 33,000,000
Operating expenses 24,000,000
Net income $9,000,000
An analysis of costs and expenses reveals that variable cost of goods sold is $76 per unit and variable operating expenses are $32 per unit.
In September, ABC Company receives a special order for 51,000 machines at $98 each from a major coffee shop franchise. Acceptance of the order would result in $16,500 of shipping costs but no increase in fixed expenses.
Instructions
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Prepare an incremental analysis for the special order. (10 marks)
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Should ABC Company accept the special order? Justify your answer. (3 marks)
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Should ABC Company accept the special order if ABC Company receives a special order for 51,000 machines at $82 per unit? Justify your answer. (7 marks)
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