Exercise 20-3

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Moonbeam Company manufactures toasters. For the first 8 months of 2017, the company reported the following operating results while operating at 75% of plant capacity:

Sales (349,200 units)		$4,375,000
Cost of goods sold		2,595,000
Gross profit		1,780,000
Operating expenses		839,300
Net income		$940,700

Cost of goods sold was 77% variable and 23% fixed; operating expenses were 87% variable and 13% fixed. In September, Moonbeam Company receives a special order for 18,500 toasters at $8.03 each from Luna Company of Ciudad Juarez. Acceptance of the order would result in an additional $3,000 of shipping costs but no increase in fixed costs. (a) Prepare an incremental analysis for the special order. (Round computations for per unit cost to 4 decimal places, e.g. 15.2500 and all other computations and final answers to the nearest whole dollar, e.g. 5,725. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Reject Order		Accept Order		Net Income Increase (Decrease)
Revenues		$		$		$
Cost of goods sold
Operating expenses
Net income		$		$		$