E7-2B Pocket Company manufactures toasters. For the first 8 months of 2014, the com- pany reported the following operating results while operating at 75% of plant capacity. Sales (400,000 units) Cost of goods sold Gross profit Operating expenses Net income $4,000,000 2,800,000 1,200,000 900,000 $ 300,000 Cost of goods sold was 75% variable and 25% fixed. Operating expenses were 70% vari- able and 30% fixed. In September, Pocket Company receives a special order for 60,000 toasters at $8 each from Sparkle Company of Carson City. Acceptance of the order would result in $10,000 of shipping costs but no increase in fixed operating expenses. Instructions (a) Prepare an incremental analysis for the special order. (b) I Should Pocket Company accept the special order? Why or why not? E7-7B Bahran uses 1,000 units of the component 136 every month to manufacture one of its products. The unit costs incurred to manufacture the component are as follows: Direct materials $ 75.00 Direct labor 50.00 Overhead 150.00 Total $275.00 Overhead costs include variable material handling costs of $10.00, which are applied to prod- ucts on the basis of direct material costs. The remainder of the overhead costs are applied on the basis of direct labor dollars and consist of 60% variable costs and 40% fixed costs. A vendor has offered to supply the J36 component at a price of $225 per unit. Instructions (a) Should Bahran purchase the component from the outside vendor if Bahran's capacity remains idle