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 (349,000 units) $4,370,000 Cost of goods sold 2,590,000 Gross profit 1,780,000 Operating expenses 839,000 Net income $941,000 Cost of goods sold was 65% variable and 35% fixed; operating expenses were 75% variable and 25% fixed. In September, Moonbeam Company receives a special order for 15,000 toasters at $7.50 each from Luna Company of Ciudad Juarez. Acceptance of the order would result in an additional $2,900 of shipping costs but no increase in fixed costs.

Step-by-step explanation:

Given:

Units, u = 349,000 units

Cost of goods sold:

variable = 65%

fixed = 35%

Operating expenses:

variable = 75%

fixed = 25%

Cost of goods sold, C = $ 2,590,000

Operating expenses, O = $839,000

Sales, S = $4,370,000

Gross profit, G = $1,780,000

Net income, I = $941,000

Variable cost of goods sold, C1 = Cost sold × variable %

= $ 2,590,000 x 65%

= 1,683,500

Variable cost per unit = Variable cost, C1/units

= 1,683,500 / 349,000

= $4.82 variable cost per unit

Variable Operating expenses, O1 = operating expenses, O × variable %

= $839,000 x 75%

Variable cost per unit = variable operating expenses/units

= 629,250/349,000

= $1.80 variable cost per unit

Incremental analysis:

Given:

Number of toasters, i = 15,000

cost per 1 toaster = $7.50

Revenue, r = (15000 × 7.50)

= $112500

Cost of Goods Sold, Cs = variable cost per unit × units of toasters

= (15,000 x 4.82)

= $72300

Operating Expenses, Os = (variable operating expenses per unit × units of toasters) + additional shipping costs

= (15,000 x 1.8) + 2900

= $27000 + $2900

= $29900

Net Income, N = revenue, r - (cost of goods sold, Cs + operating expenses, Os)

= $112500 - ($72300 + $29900)

= $10,300 gain

B.

Accept the offer.

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