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Challenge Exercise 7-1 Conklan Company manufactures outdoor fireplaces. For the first 9 months of 2020, the company reported the following operating results while operating at 80% of plant capacity: Sales (77,000 units) $6,776,000 Cost of goods sold 5,005,000 Gross profit 1,771,000 Operating expenses 770,000 Net Income $1,001,000 Cost of goods sold was 80% variable and 20% fixed; operating expenses were 70% variable and 30% fixed. In October, Conklan Company receives a special order for 4,000 fireplaces at $62 each from Langston's Landscape Company. Acceptance of the order would result in an additional $7,100 of shipping costs but no increase in fixed operating expenses. Prepare an incremental analysis for the special order. (Enter loss using either a negative sign preceding the number e.g. -2,945 or parentheses e... (2,945).) Net Income Reject order Accept order Increase (Decrease) Revenues 248000 248000 Costs Cost of Goods Sold (208000) Operating Expenses 2800 (2800) 0 208000 0 Shipping Expenses 0 7.100 (7.100) Net Income 30100 $ $ 30100 $ Should Conklan Company accept the special order? Why or why not? Yes, its income is higher with this order Before Conklan could give Langston's Landscape Company an answer, they received a special order from Benson Building & Supply for 13,700 fireplaces. Benson is willing to pay $56 per fireplace but they want a special design imbedded into the fireplace that increases cost of goods sold by $53,020. The special design also requires the purchase of a part that costs $4,500 and will have no future use for Conklan Company. Benson Building & Supply will pick up the fireplaces so no shipping costs are involved. Due to capacity limitations, Conklan cannot accept both special orders. Which order should be accepted? Document your decision by preparing an incremental analysis for Benson's order. (Enter loss using either a negative sign preceding the number e.g. -2,945 or parentheses e.g. (2,945).) Net Income Reject order Accept order Increase (Decrease) Revenues 904200 904200 Costs Cost of Goods Sold 0 134260 (134260) Operating Expenses 0 9590 (9590) Unique part 0 4,500 (4500) Net Income 0 755850 755850 Conklan should accept the order from Benson Building and Supply