ACC 560 help A Guide to career/uophelp.com ACC 560 help A Guide to career/uophelp.com | Page 33

Operating expenses 840,000
Net income $ 935,000
Cost of goods sold was 70% variable and 30% fixed; operating expenses
were 80% variable and 20% fixed.
In September, Moonbeam receives a special order for 15,000 toasters at
$7.60 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.
Instructions
 Prepare an incremental analysis for the special order.
 Should Moonbeam accept the special order? Why or why not?
E7-7
Riggs Company purchases sails and produces sailboats. It currently
produces 1,200 sailboats per year, operating at normal capacity, which is
about 80% of full capacity. Riggs purchases sails at $250 each, but the
company is considering using the excess capacity to manufacture the
sails instead. The manufacturing cost per sail would be $100 for direct
materials, $80 for direct labor, and $90 for overhead. The $90 overhead
is based on $78,000 of annual fixed overhead that is allocated using
normal capacity.
The president of Riggs has come to you for advice. “It would cost me
$270 to make the sails,” she says, “but only $250 to buy them. Should I
continue buying them, or have I missed something?”
Instructions