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Blue Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 23,900 golf discs is: Materials $ 10,994
Blue Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 23,900 golf discs is:
Materials | $ 10,994 | ||
Labor | 37,045 | ||
Variable overhead | 25,812 | ||
Fixed overhead | 46,605 | ||
Total | $120,456 |
Blue also incurs 7% sales commission ($0.48) on each disc sold. McGee Corporation offers Blue $4.91 per disc for 5,130 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Blue. If Blue accepts the offer, its fixed overhead will increase from $46,605 to $51,305 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. If amount decreases net income then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Reject Order Accept Order Net Income Increase (Decrease) Revenues $ Materials Labor Variable overhead Fixed overhead Sales commissions Net income $ (b) Should Blue accept the special order? Blue should the special orderStep by Step Solution
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