Gruden Company produces golf discs which it normally

Question # 00496662 Posted By: rey_writer Updated on: 03/07/2017 04:11 AM Due on: 03/07/2017
Subject Accounting Topic Accounting Tutorials:
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Exercise 7-2

Gruden Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 20,200 golf discs is:


Materials$ 10,100
Labor29,088
Variable overhead22,018
Fixed overhead39,794
Total$101,000


Gruden also incurs 4% sales commission ($0.28) on each disc sold.


McGee Corporation offers Gruden $4.84 per disc for 4,820 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 $39,794 to $44,824 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. 1250. 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$$$
Materials
Labor
Variable overhead
Fixed overhead
Sales commissions
Net income$$$



(b)


Should Gruden accept the special order?


Gruden should rejectaccept the special order .
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