Question & Answer: Gruden Company produces golf discs which it normally sells to retailers for $7 each. Th…..

Gruden Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 17,000 golf discs is:

Materials $  9,180
Labor 24,990
Variable overhead 17,850
Fixed overhead 34,340
Total $86,360

Gruden also incurs 6% sales commission ($0.42) on each disc sold.

McGee Corporation offers Gruden $4.95 per disc for 5,570 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Gruden. If Gruden accepts the offer, its fixed overhead will increase from $34,340 to $38,930 due to the purchase of a new imprinting machine. No sales commission will result from the special order.

(a)

Prepare an incremental analysis for the special order. (Round answers to 0 decimal places, e.g. 5,275. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Reject
Order
Accept
Order
Net Income
Increase
(Decrease)
Revenues $Entry field with incorrect answer now contains modified data $Entry field with incorrect answer now contains modified data $Entry field with incorrect answer now contains modified data
Materials Entry field with incorrect answer now contains modified data Entry field with correct answer Entry field with incorrect answer now contains modified data
Labor Entry field with incorrect answer now contains modified data Entry field with correct answer Entry field with incorrect answer now contains modified data
Variable overhead Entry field with incorrect answer now contains modified data Entry field with correct answer Entry field with incorrect answer now contains modified data
Fixed overhead Entry field with incorrect answer now contains modified data Entry field with correct answer Entry field with incorrect answer now contains modified data
Sales commissions Entry field with incorrect answer now contains modified data Entry field with correct answer Entry field with incorrect answer now contains modified data
Net income $Entry field with incorrect answer now contains modified data $Entry field with correct answer $Entry field with incorrect answer now contains modified data

Expert Answer

 

Question & Answer: Gruden Company produces golf discs which it normally sells to retailers for $7 each. Th..... 1

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