Incremental analysis for special-order decision
Not what you're looking for?
Gruner Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 20,000 golf disc is:
Materials $10,000
Labor 30,000
Variable overhead 20,000
Fixed overhead 40,000
Total $100,000
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.
Required
1. Prepare an incremental analysis for the special order.
2. Should Gruner accept the special order? Why or why not?
The template is attached.
Purchase this Solution
Solution Summary
The solution explains how to prepare an incremental analysis for special order
Purchase this Solution
Free BrainMass Quizzes
Basics of corporate finance
These questions will test you on your knowledge of finance.
Operations Management
This quiz tests a student's knowledge about Operations Management
Income Streams
In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.