Gruner Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 20,000 golf disc is:
Variable overhead 20,000
Fixed overhead 40,000
Gruner also incurs 5% sales commission ($0.35) on each disc sold.
Travis Corporation offers Gruner $4.75 per disc for 5,000 discs. Travis would sell the discs under its own brand name in foreign markets not yet served by Gruner. If Gruner accepts the offer, its fixed overhead will increase from 40,000 to 45,000 due to the purchase of a new imprinting machine. No sales commission will result from the special order.
1. Prepare an incremental analysis for the special order.
2. Should Gruner accept the special order? Why or why not?
The template is attached.© BrainMass Inc. brainmass.com June 4, 2020, 12:16 am ad1c9bdddf
The solution explains how to prepare an incremental analysis for special order