Casio Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 20,000 golf discs is: Materials $ 10,000 Labor 30,000 Variable overhead 20,000 Fixed overhead 40,000 Total $100,000 Casio also incurs 5% sales commission ($0.35) on each disc sold. McGee Corporation offers Casio $4.8 per disc for 5,000 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Casio. If Casio 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. A) Prepare an incremental analysis for the special order B) Should Casio accept the special order? Why or why not?
Casio Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 20,000 golf discs is: Materials $ 10,000 Labor 30,000 Variable overhead 20,000 Fixed overhead 40,000 Total $100,000 Casio also incurs 5% sales commission ($0.35) on each disc sold. McGee Corporation offers Casio $4.8 per disc for 5,000 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Casio. If Casio 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. A) Prepare an incremental analysis for the special order B) Should Casio accept the special order? Why or why not?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Casio Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 20,000 golf discs is:
|
Materials |
$ 10,000 |
|
Labor |
30,000 |
|
Variable |
20,000 |
|
Fixed overhead |
40,000 |
|
Total |
$100,000 |
Casio also incurs 5% sales commission ($0.35) on each disc sold.
McGee Corporation offers Casio $4.8 per disc for 5,000 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Casio. If Casio 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.
A) Prepare an incremental analysis for the special order
- B) Should Casio accept the special order? Why or why not?
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