Exercise 21-3

Moonbeam Company manufactures toasters. For the first 8 months of 2017, the company reported the following operating results while operating at 75% of plant capacity:

Sales (350,500 units) - $4,371,000 Cost of goods sold - 2,590,000 Gross profit - 1,781,000 Operating expenses - 839,900 Net income - $941,100

Cost of goods sold was 73% variable and 27% fixed; operating expenses were 83% variable and 17% fixed.

In September, Moonbeam Company receives a special order for 18,600 toasters at $7.95 each from Luna Company of Ciudad Juarez. Acceptance of the order would result in an additional $3,000 of shipping costs but no increase in fixed costs.

(a) Prepare an incremental analysis for the special order. (Round computations for per unit cost to 4 decimal places, e.g. 15.2567 and all other computations and final answers to the nearest whole dollar, e.g. 5,725. Enter negative amounts 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 $ Cost of goods sold Operating expenses Net income (b) Should Moonbeam Company accept the special order? Moonbeam Company the special order