Gadson 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   Gadson also incurs 5% sales commission ($0.35) on each disc sold.Johnson Corporation offers Gadson $4.80 per disc for 5,000 discs. Johnson would sell the discs under its own brand name in foreign markets not yet served by Gadson. If Gadson 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. Prepare an incremental analysis for the special order.     RejectOrder   AcceptOrder   Net IncomeIncrease(Decrease)     Revenues   $    $    $    Materials               Labor               Variable overhead               Fixed overhead               Sales commissions               Net income   $    $    $      Should Gadson accept the special order?

Question

Gadson 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

 


Gadson also incurs 5% sales commission ($0.35) on each disc sold.

Johnson Corporation offers Gadson $4.80 per disc for 5,000 discs. Johnson would sell the discs under its own brand name in foreign markets not yet served by Gadson. If Gadson 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.

  • Prepare an incremental analysis for the special order.
 

 

Reject
Order

 

Accept
Order

 

Net Income
Increase
(Decrease)

 

 

Revenues

 

 

 

 

Materials

             

Labor

             

Variable overhead

             

Fixed overhead

             

Sales commissions

             

Net income

 

 

 

 

 

Should Gadson accept the special order?

Expert Answer

Want to see the step-by-step answer?

Check out a sample Q&A here.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.
Tagged in
Business
Accounting

Related Accounting Q&A

Find answers to questions asked by students like you.

Q: rt A company sells a product which has a unit sales price of $6, unit variable cost of $4 and total ...

A: Compute contribution margin per unit as shown below:

Q: Medoc Company provides the following information about its single product Targeted operating income ...

A: Target operating income: It refers to the desired amount of profit that a company expects to achieve...

Q: I know this has to do with oportunity cost and the associated risk, but I'm not sure how to make a d...

A: This is a question of cost benefit analysis. We have to see whether there is any gain/ profit after ...

Q: Contribution Margin and Contribution Margin Ratio For a recent year, Wicker Company-owned restaurant...

A: Contribution margin is calculated by subtracting variable expenses from the sales revenue of a compa...

Q: Brief Exercise 7-06 The cash register tape for Larkspur Industries reported sales of $10,169.80.Rec...

A: Prepare the journal entries:

Q: 1-8  Identify the related form of business for the following 1) Johnson, Capital 2) Common Stock 3) ...

A: Forms of business organization: Sole proprietorship: The form of business entity which is owned and ...

Q: how would i find the maximum contribution margin?

A: Contribution Margin:Contribution Margin is the amount by which sales revenue exceeds variable cost. ...

Q: How do you find the amount of payment to be credited and the balance outstanding when you know the a...

A: GivenInvoice Value = $600Invoice Date = 7/5Conditions for Payment = 4/10 and n/60This condition mean...

Q: Fixed costs are $2400000 and the unit contribution margin is $300. What is the break even point? O $...

A: Break-Even Point: It is the point of sales at which entity neither earns a profit nor suffers a loss...

Q: Current Attempt in Progress Moss, Inc. has total fixed costs of $56,000 and a contribution margin ra...

A: Compute target fixed cost as shown below:

Q: My text book is  Hospitality Industry Financial Accounting (4th edition). I am in chapter 10 -- INVE...

A: Weighted average method helps in valuation of stock and decides the average cost of stock based on t...

Q: The twig stands are more popular, so Bobby sells four twig stands for every one oak stand. Katie cha...

A: Calculate number of each plant seed required for break-even:

Q: At the end of the current year. Accounts Receivable has a balance of $4,375,000; Allowance for Doubt...

A: a.Detremine the amount of adjusting entry for uncollectible accounts.

Q: Sales Mix and Break-Even Sales Dragon Sports Inc. manufactures and sells two products, baseball bats...

A: Break-Even Sales (Unit):The Break-even number in units, as the name suggest, is the number of units ...

Q: Hyde's Headphones sells deluxe headphones for $55 each. Unit variable expenses total $50. The breake...

A: Margin of Safety: Margin of safety is the excess of expected sales over the break-even sales. It is ...

Q: Federal Income Tax WithholdingBob Browning's weekly gross earnings for the present week were $2,770....

A: Calculate the federal income tax with holding:

Q: Which of the following is not a tax preference or adjustment item for the individual alternative min...

A: Alternative minimum tax (AMT) is the compulsory minimum tax which an individual or corporate has to ...

Q: A machine that cost $100,000 has an estimated residual value of $10,000 and an estimated useful life...

A: Calculate the depreciation expense per machine hour.

Q: Martha has a 3-year-old child and pays $10,000 a year in day care costs. Her salary is $45,000. ...

A: Qualified person for Child and department care credit can be either of these: Any child who is your ...

Q: Brief Exercise 8-03 a-b At the end of 2021, Larkspur Co. has accounts receivable of $675,100 and an...

A: (a).Prepare the journal entry to record the write-off: 

Q: How do you find the cash discount and the net amount paid when you know the gross amount of invoice ...

A: Cash discount is a rebate permitted by certain vendors of merchandise or by certain service provider...

Q: Recording Purchases and Shipping Terms On May 12, Digital Distributors received three shipments of m...

A: Click to see the answer

Q: My text book is  Hospitality Industry Financial Accounting (4th edition). I am in chapter 12 -- CURR...

A: Payroll: Payroll refers to the total amount that is required to be paid by the company to its employ...

Q: Exercise 8-07 On December 31, 2021, when its Allowance for Doubtful Accounts had a debit balance of...

A: Click to see the answer

Q: My text book is  Hospitality Industry Financial Accounting (4th edition). I am in chapter 11 -- PROP...

A: Capital expenditure: It refers to the amount spent on acquiring, maintaining, and improving the fixe...

Q: My text book is Hospitality Industry Financial Accounting (4th edition). I am in chapter 9 -- RECEIV...

A: Determine the amount of expected loss as at December 31, 20x3.

Q: Waterway Industries produces flash drives for computers, which it sells for $26 each. The variable c...

A: Break-Even Sales: Sales volume required to cover the fixed and variable costs and left out with neit...

Q: Crazy Corporation issued $300,000 of 10%, 20-year bonds at 106 on January 1, 2012. Interest is payab...

A: The bond issue premium represents the excess of bonds proceeds on issue over the face value of the b...

Q: What is the Indirect Method used when preparing the Statement of Cash Flows and please give me a few...

A: Indirect method: Under indirect method the net income is adjusted with the increase or decrease of c...

Q: Classifying Liability-Related Accounts into Balance Sheet or Income StatementIndicate the proper fin...

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and s...

Q: At​ year-end, StickStick has cash of $ 22 comma 000$22,000​, current accounts receivable of $ 80 com...

A: Calculate the receivables turnover ratio.

Q: Cash Budget The controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash bud...

A: A cash budget is prepared to ensure the sufficiency of cash in the company. It is prepared to calcul...

Q: 1-9 (4) Revenues for 2028 $97,000 Dividends declared in 2028 $0 Expenses for 2028 unknown Jan 1 reta...

A:  Retained earnings: Retained earnings are that portion of profits which are earned by a company but ...

Q: Support Department Cost Allocation—Direct Method Charlie’s Wood Works produces wood products (e.g., ...

A: Cost allocation:The cost allocation refers to the process of allocating the costs associated with th...

Q: View Policies Current Attempt in Progress t Winston Company's high and low level of activity last ye...

A: High-low method: The high low method refers to the cost accounting procedure used to separate the fi...

Q: The Aleutian Company produces two products, Rings and Dings. They are manufactured in two department...

A:  1. Calculation of overhead cost per unit of Dings: Results of the formulas used in the Excel table ...

Q: My text book is  Hospitality Industry Financial Accounting (4th edition). I am in chapter 12 -- CURR...

A: 1.Prepare journal entry to record the payroll of Hotel Properties, Inc. on February 15, 20x1.

Q: If fixed costs are $1,484,000, the unit selling price is $232, and the unit variable costs are $101,...

A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question s...

Q: Lower of Cost or Market Garcia Company's inventory at the end of the year was recorded in its accoun...

A: Lower of Cost or market (LCM):The lower of cost or market rule states that a business must record th...

Q: Scott Incorporated has been in business for several months. Because of increased competition in the ...

A: Break-Even Point: A break-even point is a production level of a company where their revenue equals t...

Q: Please assit with part d (bold below)of this practive problem: Practice 2: Pet Park International se...

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and s...

Q: 1-2 Please state what financial statement(s) the following accounts go on 1) Net income 2) End of-pe...

A: Financial statements: Financial statements are condensed summary of transactions communicated in the...

Q: Margin of Safety a. If Canace Company, with a break-even point at $386,900 of sales, has actual sale...

A: a. 1. Calculate the margin of safety (in Dollars).

Q: Journal Entries for Payment of Employer Payroll Taxes Jason Chen owns a business called Chen Home Bu...

A: Record journal entry for payment of employee federal income tax, social security and Medicare taxes ...

Q: conduct horizontal and vertical analyses for the balance sheet and income statement accounts and rep...

A: Use basic financial analysis to examine any horizontal changes in Starbuck’s short- and long-term de...

Q: Assignment/takeAssignmentMain.do?invoker-&takeAssignmentSessionLocator=assignment-take&inprogress-f ...

A: Step 1: Calculate the Average price unit.

Q: Following are excerpts from an income statement: Food Sales 265000 Beverage Sales 80000 Cost ...

A: Hence, the prime cost is $209,000 which is obtained by the addition of cost of sales and labour.The ...

Q: Adjusted Trial Balance     December 31, 2014               Debit Credit Cash         6,590   ...

A: Income statement: The financial statement which reports revenues and expenses from business operatio...

Q: Exercise 8-04 Assume the following information for Teal Mountain Corp. Accounts receivable (begi...

A: Prepare journal entries of sales, collections, write off, and reverse entries: 

Q: Explain the meaning of customer value. How is focusing on customer value changing managerial account...

A: Customer value: The customers play a wider role in the business. The major business transactions rev...