Chapter 8: Exercises 2, 6, and 9, P8-3A E7-3
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( 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
� 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