Carter Company manufactures cappuccino makers. For the first eight months of the year the company reported the following operating results while operating at 80% of plant capacity: 
Sales (500,000 units) .... $75,000,000
Cost of goods sold ...... 45,000,000
Gross profit ........ 30,000,000
Operating expenses ..... 24,000,000
Net income ......... $6,000,000

An analysis of costs and expenses reveals that variable cost of goods sold is $80 per unit and variable operating expenses are $30 per unit.

In September, Carter Company receives a special order for 40,000 machines at $120 each from a major coffee shop franchise. Acceptance of the order would result in $10,000 of shipping costs but no increase in fixed expenses.

(a) Prepare an incremental analysis for the special order. 
(b) Should Carter Company accept the special order? Justify your answer. 

  • CreatedMay 14, 2012
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