>> Accounting Basics
Gruner Co. produces golf discs which it normally sells to retailers for $6.92 each. The cost of manufacturing 20,100 disc is :
- Materials $10,251
- Labor 30,954
- Variable overhead 20,301
- Fixed overhead 39,396
Gruner also incurs 7% sales commission ($0.48) on each disc. Travis Corporation offers Gruner $4.97 per disc for 5,800 disc. 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 $39,396 to 44,095 due to the purchase of a new imprinting machine. No sales commission will result from the special order.
Reject Accept order Net income.