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Category > Accounting Posted 24 May 2017 My Price 6.00

Gruner Company produces golf discs which it normally sells to retailers for $7 each

Materials

$  10,000

Labor

30,000

Variable overhead

20,000

Fixed overhead

40,000

Total

$100,000

 
 

E7-2 Gruner Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 20,000 golf discs   is:

Gruner also incurs 5% sales commission ($0.35) on each disc sold.

Travis Corporation offers Gruner $4.75 per disc for 5,000 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 $40,000 to $45,000 due to the purchase of a new imprinting machine. No sales commission will result from the special order.

Instructions

(a)   Prepare an incremental analysis for the special order.

(b)   Should Gruner accept the special order? Why or why not?

(c)    What assumptions underlie the decision made in part (b)?

 

Answers

Alpha Geek
(8)
Status NEW Posted 24 May 2017 07:05 AM My Price 6.00

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Attachments

file 1495610791-Answer.docx preview (194 words )
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