Exercise 12-2

Ayayai Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 19,900 golf discs is:

Materials		$ 10,547
Labor		30,049
Variable overhead		20,298
Fixed overhead		39,800
Total		$100,694

Ayayai also incurs 4% sales commission ($0.29) on each disc sold. McGee Corporation offers Ayayai $4.99 per disc for 5,330 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Ayayai. If Ayayai accepts the offer, its fixed overhead will increase from $39,800 to $44,300 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).)