Gruden Company produces golf discs, which it normally sells to retailers for $9 each. The cost of manufacturing 20,000 golf discs is:

Materials		$9,600
Labour		31,000
Variable overhead		18,000
Fixed overhead		42,000
Total		$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			$
LessAdd Incremental cost:
Fixed cost
Incremental income			$

Should Gruden accept the special order? Why or why not?

Gruden should acceptnot accept the special order, as it will increasedecrease their net income by $ .

What assumption underlies the decision made in part (b)?

The assumption underlying the decision is that current sales will notwill be affected if Gruden accepts the offer.