Answered: Revenues Materials: Labor Variable…

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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Transcribed Image Text:Pharoah Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 23,600 golf discs is: Materials Labor Variable overhead Fixed overhead Total $ 12,744 36,344 24,308 48,144 $121.540 Pharoah also incurs 7% sales commission ($0.49) on each disc sold. McGee Corporation offers Pharoah $4.90 per disc for 5,100 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Pharoah. If Pharoah accepts the offer, it will incur a one-time fixed cost of $4,570 due to the rental of an imprinting machine. No sales commission will result from the special order. Assume there is sufficient capacity to accommodate the special order. (a) Prepare an incremental analysis for the special order. (Enter negative amounts using either a negative sign preceding the number eg.-45 or parentheses eg. (45))

Revenues
Materials
Labor
Variable overhead
Cost of equipment rental
Net income.
$
Pharoah should
$
Reject
Order
(b)
Should Pharoah accept the special order?
the special order.
$
Accept
Order
200
$
Net Income
Increase
(Decrease)
IN

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