Problem: Gruner Company produces golf discs which it normally sells to retailers for $7.16 each. The cost of manufacturing 20,200 golf discs is:
Materials $10,302
Labor 29,290
Variable overhead 20,402
Fixed overhead 39,592
Total $99,586
Gruner also incurs 8% sales commission ($0.57) on each disc sold.
Travis Corporation offers Gruner $4.76 per disc for 4,000 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 $39,592 to $44,222 due to the purchase of a new imprinting machine. No sales commission will result from the special order.
Prepare an incremental analysis for the special order.
(If answer is zero, please enter 0. Do not leave any fields blank. If amount decreases the income, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Enter all amounts in columns "Reject Order" and "Accept Order" as positive amounts and subtract where necessary.)
Reject Order Accept Order Net Income Effect
Reject Order Accept Order Net Income Effect
Revenues $ ___ $19,040 $19,040
Materials ___ 2,040 ____
Labor ___ 5,800 ____
Variable overhead ___ ___ ____
Fixed Overhead ___ 4,630 ____
Sales commission ___ ___ ____
Net income $ ___ $2,530 $2,530