Walston Company produces kitchen cabinets for homebuilders across the western United
States. The cost of producing 5,000 cabinets is as follows.

Walston also incurs selling expenses of $20 per cabinet. Wellington Corp. has offered
Walston $165 per cabinet for a special order of 1,000 cabinets. The cabinets would be sold
to homebuilders in the eastern United States and thus would not conflict with Walston’s
current sales. Selling expenses per cabinet would be only $5 per cabinet. Walston has
available capacity to do the work.
Instructions
(a) Prepare an incremental analysis for the special order.
(b) Should Walston accept the special order? Why or why not?

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Materials Labor Variable overhead Fixed overhead Total $ 500,000 250,000 100,000 400,000 $1,250,000