Gruner Company produces golf discs which it normally sells to retailers for $7 each. The cost of

Question:

Gruner 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

Gruner also incurs 5% sales commission ($0.35) on each disc sold.

Travis Corporation offers Gruner $4.75 per disc for 5,000 discs. Travis would sell the discs under its own brand name in foreign markets not yet served by Gruner. If Gruner accepts the offer, its fixed overhead will increase from $40,000 to $45,000 due to the purchase of a new imprinting machine. No sales commission will result from the special order.

Instructions

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

(b) Should Gruner accept the special order? Why or why not?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...