Kona Company manufactures plastic plates. For 2021, the company reported the following operating

results while operating at 70% of plant capacity:

Sales (20,000 units)

Cost of goods sold

Gross profit

Operating expenses

Net income

$100.000

65.000

35.000

20,000

$15,000

T

An analysis of costs and expenses reveals that variable cost of goods sold is $1.80 per unit and variable

operating expenses are $0.20 per unit. In January 2022, Kona Company receives a special order for 5,000

plates at $4 each from a major party shop. Acceptance of the order would result in $1,000 of shipping

costs but no increase in fixed expenses.

Instructions

(a) Prepare an incremental analysis for the special order. Should Kona accept a special order?

Prepare a complete work for full mark. (13 marks)

(b) When do managers perform incremental analysis? What are five common types of decisions

involving incremental analysis? Provide an example for each type for full mark. (12 marks)