Exercise 7.18 a-c Gruden Company produces golf discs, which it normally sells to retailers for $9 each. The cost of manufacturing 20,000 golf discs is: Materials Labour Variable overhead Fixed overhead Total $9,600 31,000 18,000 42,000 $100,600 Gruden also incurs 5% sales commission ($0.45) on each disc sold. McGee Corporation offers Gruden $4.50 per disc for 5,000 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Gruden. If Gruden accepts the offer, its fixed overhead will increase from $42,000 to $47,100 due to the purchase of a new imprinting machine. No sales commission will result from the special order. Prepare an incremental analysis for the special order. (Round per unit calculations to 2 decimal places, e.g. 15.25 and final answers to 0 decimal places, e.g. 5,275.) Incremental contribution margin Incremental cost: Fixed cost Incremental income Should Gruden accept the special order? Why or why not? Gruden should the special order, as it will their net income by $ What assumption underlies the decision made in part (b)? The assumption underlying the decision is that current sales be affected if Gruden accepts the offer