PART 1 - Incremental Analysis Gagandeep Corporation manufactures basketballs. Currently they have capacity to produce 15,000 basketballs
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PART 1 - Incremental Analysis
Gagandeep Corporation manufactures basketballs. Currently they have capacity to produce 15,000 basketballs during the quarter. Gagandeep Corp. receives a special order request from Harpal Corp. for 2,000 basketballs. Harpal offers to purchase the basketballs for $45 per unit. Normal production costs are direct materials of $10/unit, direct labour of $15/hour, variable manufacturing overhead of $2.50/unit and fixed manufacturing overhead of $10,000.
Each unit takes 0.5 hours to produce. To fulfill the order Gagandeep Corp. would also incur a selling cost of $3/unit. As of now Gagandeep Corp. is operating at 80% capacity.
- Perform incremental analysis to see if Gagandeep Corp. should accept this special order.
- Are there any irrelevant costs in the above scenario? If so, state which one(s)
- How would your analysis change if Gagandeep Corp. was operating at full capacity.
Related Book For
Managerial Accounting Tools for business decision making
ISBN: 978-1118096895
6th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
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