Reference no: EM132640080

Problem 1: Gruden Company produces golf discs, which it normally sells to retailers for $7 each. The cost of manufacturing 20,000 golf discs is:

Use incremental analysis for special-order decision.

Materials             $ 10,000

Labour                  30,000

Variable overhead

Fixed overhead      40,000

Total                   $100,000

1. Gruden also incurs 5% sales commission ($0.35) on each disc sold.
2. McGee Corporation offers Gruden $4.80 per disc for 5,000 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 $40,000 to $46,000 due to the purchase of a new imprinting machine. No sales commission will result from the special order.