The following table presents an analysis for deciding whether to accept or reject a special order, aimed at calculating the potential net income increase or decrease. There are columns for Reject Order, Accept Order, and Net Income Increase (Decrease). The values are as follows:| Reject Order | | Accept Order | | Net Income Increase (Decrease) ||--------------|----------------|--------------|---------------|---------------------------------|| Revenues | $ | Revenues | $ 21,600 | $ || Materials | $ | Materials | $ 2,025 | $ || Labor | $ | Labor | $ 6,300 | $ || Variable overhead | $ | Variable overhead | $ 4,275 | $ || Fixed overhead | $ | Fixed overhead | $ 4,500 | $ || Sales commissions| $ 0 | Sales commissions | $ 0 | $ || Net income | $ | Net income | $ 4,500 | $ |#### Analysis:1. **Revenues**: If the special order is accepted, the revenue will be $21,600.2. **Materials Cost**: Accepting the special order results in a materials cost of $2,025.3. **Labor Cost**: Labor cost for accepting the special order is $6,300.4. **Variable Overhead**: Variable overhead cost is $4,275 if the special order is accepted.5. **Fixed Overhead**: Fixed overhead remains consistent at $4,500 for the special order.6. **Sales Commissions**: There are no sales commissions involved in this scenario ($0 for both Reject and Accept orders).7. **Net Income**: Accepting this special order results in a net income of $4,500.#### Decision Making:Based on the table above, Crane should assess whether the net income of $4,500 from accepting the special order is beneficial compared to the base case scenario (rejecting the order).#### Conclusion:Should Crane accept the special order?*Crane should* ______ the special order.(Note: The participant should fill in whether Crane should "accept" or "reject" the special order based on their assessment.) ### Incremental Analysis for Special Order of Golf Discs**Crane Company produces golf discs, which it normally sells to retailers for $7 each. The cost of manufacturing 15,000 golf discs is detailed below:**- **Materials:** $6,750- **Labor:** $21,000- **Variable Overhead:** $14,250- **Fixed Overhead:** $29,250- **Total Cost:** $71,250**Additional Costs:**- Crane also incurs a 4% sales commission ($0.28) on each disc sold.**Special Offer Consideration:**- McGee Corporation offers Gruden $4.80 per disc for 4,500 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Crane.- If Crane accepts the offer, its fixed overhead will increase from $29,250 to $33,750 due to the purchase of a new imprinting machine.- No sales commission will result from the special order.### Task:(a) **Prepare an incremental analysis for the special order.** *Note: Enter negative amounts using either a negative sign preceding the number (e.g., -45) or parentheses (e.g., (45)).*

Incremental analysis is considered as one of the comparative decision-making approach. Business…

Answered: Crane Company produces golf discs which…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The following table presents an analysis for deciding whether to accept or reject a special order, aimed at calculating the potential net income increase or decrease. There are columns for Reject Order, Accept Order, and Net Income Increase (Decrease). The values are as follows:

| Reject Order | | Accept Order | | Net Income Increase (Decrease) |
|--------------|----------------|--------------|---------------|---------------------------------|
| Revenues | $ | Revenues | $ 21,600 | $ |
| Materials | $ | Materials | $ 2,025 | $ |
| Labor | $ | Labor | $ 6,300 | $ |
| Variable overhead | $ | Variable overhead | $ 4,275 | $ |
| Fixed overhead | $ | Fixed overhead | $ 4,500 | $ |
| Sales commissions| $ 0 | Sales commissions | $ 0 | $ |
| Net income | $ | Net income | $ 4,500 | $ |

#### Analysis:
1. **Revenues**: If the special order is accepted, the revenue will be $21,600.
2. **Materials Cost**: Accepting the special order results in a materials cost of $2,025.
3. **Labor Cost**: Labor cost for accepting the special order is $6,300.
4. **Variable Overhead**: Variable overhead cost is $4,275 if the special order is accepted.
5. **Fixed Overhead**: Fixed overhead remains consistent at $4,500 for the special order.
6. **Sales Commissions**: There are no sales commissions involved in this scenario ($0 for both Reject and Accept orders).
7. **Net Income**: Accepting this special order results in a net income of $4,500.

#### Decision Making:
Based on the table above, Crane should assess whether the net income of $4,500 from accepting the special order is beneficial compared to the base case scenario (rejecting the order).

#### Conclusion:
Should Crane accept the special order?

*Crane should* ______ the special order.

(Note: The participant should fill in whether Crane should "accept" or "reject" the special order based on their assessment.)

Transcribed Image Text:### Incremental Analysis for Special Order of Golf Discs **Crane Company produces golf discs, which it normally sells to retailers for $7 each. The cost of manufacturing 15,000 golf discs is detailed below:** - **Materials:** $6,750 - **Labor:** $21,000 - **Variable Overhead:** $14,250 - **Fixed Overhead:** $29,250 - **Total Cost:** $71,250 **Additional Costs:** - Crane also incurs a 4% sales commission ($0.28) on each disc sold. **Special Offer Consideration:** - McGee Corporation offers Gruden $4.80 per disc for 4,500 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Crane. - If Crane accepts the offer, its fixed overhead will increase from $29,250 to $33,750 due to the purchase of a new imprinting machine. - No sales commission will result from the special order. ### Task: (a) **Prepare an incremental analysis for the special order.** *Note: Enter negative amounts using either a negative sign preceding the number (e.g., -45) or parentheses (e.g., (45)).*

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