Answer:
Moonbeam Company
a) Incremental analysis for the special order:
Sales revenue ($7.87 * 20,800) = $163,696
Variable costs ($6.62 * 20,800) = (137,696)
Contribution margin = 26,000
Shipping costs (2,900)
Net income from special order = $23,100
b) Moonbeam should accept the special order. It generates some net income for covering the company's fixed cost and does not exceed the company's plant capacity. It only adds about 4% to the operating plant capacity.
Explanation:
a) Data and Calculations:
Total Variable Fixed
Sales (375,200 units) $4,378,000
Cost of goods sold 2,588,880 1,812,216 776,664
Gross profit 1,789,120
Operating expenses 839,510 671,608 167,902
Net income $949,610
Total costs $2,483,824 $944,566
Selling price = $11.67 ($4,378,000/375,200)
Variable costs per unit = $6.62 ($2,483,824/375,200)
Total plant capacity = 500,267 units (375,200/75%)
Increase in plant capacity = 396,000 (375,200 + 20,800)
