ACC 560 MART Education Terms/acc560mart.com ACC 560 MART Education Terms/acc560mart.com | Page 27

Sales (350,000 units)

$4,375,000

Cost of goods sold

2,600,000

Gross profit

1,775,000

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
a.

Prepare an incremental analysis for the special order.

b.

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?‖