Carter Company manufactures cappuccino makers. For the first eight months of the year the company reported the

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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.


Instructions 

(a) Prepare an incremental analysis for the special order. 

(b) Should Carter Company accept the special order? Justify your answer. 


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Accounting Business Reporting For Decision Making

ISBN: 9780730302414

4th Edition

Authors: Jacqueline Birt, Keryn Chalmers, Albie Brooks, Suzanne Byrne, Judy Oliver

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