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    Incremental Analysis

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    If an incremental analysis looks like this:
    Reject Accept Net Income
    Order Order Increase(Decrease)
    Revenues
    Costs
    Net Income

    How do I go about solving this problem? Do I need to worry about Margin per unit/dollars?

    Carter Company manufactures cappuccino makers. For the first eight months of 2004 the company reported the following operating results while operating at 80% of plant capacity:

    Sales (500,000 units) $75,000,000
    Cost of goods sold 45,000,000
    Gross profit 30,000,000
    Operating expenses 24,000,000
    Net income $ 6,000,000

    An analysis of costs and expenses reveals that variable cost of goods sold is $80 per unit and variable operating expenses are $30 per unit.

    In September, Carter Company receives a special order for 40,000 machines at $120 each from a major coffee shop franchise. Acceptance of the order would result in $10,000 of shipping costs but no increase in fixed expenses.

    Instructions
    (a) Prepare an incremental analysis for the special order.
    (b) Should Carter Company accept the special order? Justify your answer.

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    https://brainmass.com/business/accounting/incremental-analysis-39438

    Solution Preview

    Variable Cost = $80+$30=$110
    Total Fixed Cost=$10,000
    Total Incremental Cost = $110*40000+10000 =4410000

    Incremental ...

    $2.19

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