Example 1: Pederson Enterprises produces giant stuffed bears. Each bear consists of $12 of variable costs and $9 of fixed costs and sells for $45. A wholesaler offers to buy 8,000 units at $14 each, of which Pederson has the capacity to produce. Pederson will incur extra shipping costs of $1 per bear. Instructions Determine the incremental income or loss that Pederson Enterprises would realize by accepting the special order. Example 2: Parks Corporation currently manufactures 3,000 staplers annually for its main product. The costs per stapler are as follows: Direct materials Direct labor Variable overhead Fixed overhead Total Gallup Company has contacted Parks with an offer to sell it 3,000 staplers for $18 each. $5 of the fixed overhead per unit is unavoidable. Instructions Prepare an incremental analysis for the make-or-buy decision. Example 3: Keith Inc. has 4 product lines: sour cream, ice cream, yogurt, and butter. Demand of individual products is not affected by changes in other product lines. 30% of the fixed costs are direct, and the other 70% are allocated. Results of June follow: Units sold Revenue Variable departmental costs Fixed costs Net income (loss) Sour Cream 2,000 $10,000 6,000 5,000 $ (1.000) Ice Cream 500 $20,000 13,000 2,000 $ 5.000 Yogurt 400 $10,000 4,200 3,000 $ 2.800 Butter 200 $20,000 4,800 7,000 $ 8,200 Total 3,100 $60,000 28,000 17,000 $15.000 Instructions Prepare an incremental analysis of the effect of dropping the sour cream product line