Reference no: EM132986538
Question - Gruden Company produces golf discs, which it normally sells to retailers for $12 each. The cost of manufacturing 18,400 golf discs is:
Materials $10,488
Labour 30,544
Variable overhead 22,080
Fixed overhead 41,000
Total $104,112
Gruden also incurs 5% sales commission ($0.60) on each disc sold.
McGee Corporation offers Gruden $7.20 per disc for 4,600 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 $41,000 to $46,600 due to the purchase of a new imprinting machine. No sales commission will result from the special order.
Prepare an incremental analysis for the special order.
Should Gruden accept the special order? Why or why not?
Gruden should not accept/accept the special order, as it will increase/decrease their net income by $?
What assumption underlies the decision made in part (b)?
The assumption underlying the decision is that current sales will/will not be affected if Gruden accepts the offer.
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