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 (350,800 units) $4,372,000 Cost of goods sold 2,608,000 Gross profit 1,764,000 Operating expenses 839,100 Net income $924,900

Cost of goods sold was 69% variable and 31% fixed; operating expenses were 79% variable and 21% fixed. In September, Moonbeam Company receives a special order for 24,200 toasters at $7.63 each from Luna Company of Ciudad Juarez. Acceptance of the order would result in an additional $3,100 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 should reject should accept the special order.