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Gruden Company produces golf discs which it normally sells to retailers for $7.09 each.

The cost
of manufacturing 21,000 golf discs is:
Materials

$10,710

Labor

31,710

Variable overhead

20,160

Fixed overhead

41,370

Total

$103,950

Gruden also incurs 6% sales commission ($0.43) on each disc sold.


McGee Corporation offers Gruden $5 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 $41,370 to $47,367 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. (Enter negative amounts using either
a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Reject
Order

Net Income
Increase
(Decrease)

Accept
Order

Revenues

$ 0

$ 23000

$ 23000

Materials

-2346

-2346

Labor

-6946

-6946

Variable overhead

-4416

-4416

Fixed overhead

-5997

-5997

Sales commissions

$3295

$3295

Net income

LINK TO TEXT

Should Gruden accept the special order?


Yes

$0