Answer:
Increase in income= $2,965.6
Explanation:
Giving the following information:
Gruden Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 23,600 golf discs is:
Materials $ 12,036
Labor 35,400
Variable overhead 23,128
Fixed overhead 47,200
Total $117,764
McGee Corporation offers Gruden $4.91 per disc for 4,930 discs. If Gruden accepts the offer, its fixed overhead will increase from $47,200 to $53,700 due to the purchase of a new imprinting machine.
Total variable cost= (12,036 + 35,400 + 23,128)= 70,564
Unitary variable cost= 70,564/23,600= $2.99
Increase in fixed costs= $6,500
Increase in income= (4930*4.91) - (4930*2.99) - 6500= $2,965.6
