Question
Gruden Company produces golf discs which it normally sells to retailers for $7each. The cost of manufacturing23,900golf discs is: Materials$:10,994 Labor: 37,045 Variable overhead: 25,812
Gruden Company produces golf discs which it normally sells to retailers for $7each. The cost of manufacturing23,900golf discs is:
Materials$:10,994
Labor: 37,045
Variable overhead: 25,812
Fixed overhead: 46,605
Total$:120,456
Gruden also incurs7% sales commission ($0.49) on each disc sold.
McGee Corporation offers Gruden $4.90per disc for5,100discs. 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 $46,605to $51,305due to the purchase of a new imprinting machine. No sales commission will result from the special order.
(a) Prepare incremental analysis for the special order.(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
Materials
Labor
Variable overhead
Fixed overhead
sales commissions
Net Income
(b)Should Gruden accept the special order?
Gruden shouldselect between accept and reject the special order .
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