Ember Company manufactures outdoor cooking grills. For the first eight (8) months of 2012 the company reported
Question:
Ember Company manufactures outdoor cooking grills. For the first eight (8) months of 2012 the company reported the following operating results while operating under plant capacity.
Sales (40,000 units) | $ 400,000 |
Cost of goods sold | 140,000 |
Gross profit | 260,000 |
Operating expenses | 60,000 |
Net Income | $ 200,000 |
In the above data, 40% of the cost of goods sold is variable cost and 20% of the operating expenses are variable expenses.
In September 2012 the company received a special order offer for 6,000 units to be purchased at $5 each from a company in Taiwan. If the order is accepted fixed costs will not be affected but there will be total shipping costs incurred of $10,000.
Prepare an incremental analysis for the special order and make the decision whether to accept or reject the offer with your reason for the decision made.
Accounting Business Reporting For Decision Making
ISBN: 9780730302414
4th Edition
Authors: Jacqueline Birt, Keryn Chalmers, Albie Brooks, Suzanne Byrne, Judy Oliver