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Innova Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 20,000 golf discs is: Materials $10,000 Labor
Innova Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 20,000 golf discs is: Materials $10,000 Labor 30,000 Variable overhead 20,000 Fixed overhead 40,000 Total $100,000 Innova also incurs 5% sales commission ($0.35) on each disc sold. Mudd Corporation offers Innova $4.75 per disc for 5,000 discs. Mudd would sell the discs under its own brand name in foreign markets not yet served by Innova. If Innova accepts the offer, its fixed overhead will increase from $50,000 to $55,000 due to the purchase of a new imprinting machine. No sales commission will result from the special order. Complete the incremental analysis for the special order. (If an amount is blank enter 0, all boxes must be filled to be correct. If the impact on net income is a decrease use either a negative sign in front of the number, e.g. -45 or parenthesis, e.g. (45). Enter all other numbers as positive and subtract as necessary.) Reject Order Accept Order Net Income Increase(Decrease) ____________________________________________________________________ Revenues $ $ $ Materials Labor Variable overhead Fixed Overhead Sales commission Net income $ $ $ Should Innova accept the special order? NoYes
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