College of Business

Class activity: Differential Analysis: The Key to Decision Making

Module: ACC $202$ Managerial Accounting

Chapter: $6$

Task $1$:

Walston Company produces kitchen cabinets for homebuilders across the western United

States. The cost of producing $5,000$ cabinets is as follows.

Walston also incurs selling expenses of $$20$ per cabinet. Wellington Corp. has offered

Walston $$165$ per cabinet for a special order of $1,000$ cabinets. The cabinets would be sold

to homebuilders in the eastern United States and thus would not conflict with Walston's

current sales. Selling expenses per cabinet would be only $$5$ per cabinet. Walston has

available capacity to do the work.

Instructions

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

$($b$)$ Should Walston accept the special order? Why or why not?