Gruden Company produces golf discs which it normally sells to retailers for $7 each. Gruden also incurs 5% sales commission ($0.35) on each disc sold. 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 McGee Corporation offers Gruden $4.80 per disc for 5,000 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Gruden. If Gruden accepts the offer, it will incur a one-time fixed cost of $6,000 due to the rental of an imprinting machine. No sales commission will result from the special order. a. Prepare an incremental analysis for the special order. b. Should Gruden accept the special order? Why or why not? c. What assumptions underlie the decision made in part (b)?

Gruden Company produces golf discs which it normally sells to retailers for $7 each. Gruden also incurs 5% sales commission ($0.35) on each disc sold. 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 McGee Corporation offers Gruden $4.80 per disc for 5,000 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Gruden. If Gruden accepts the offer, it will incur a one-time fixed cost of $6,000 due to the rental of an imprinting machine. No sales commission will result from the special order. a. Prepare an incremental analysis for the special order. b. Should Gruden accept the special order? Why or why not? c. What assumptions underlie the decision made in part (b)?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter2: Building Blocks Of Managerial Accounting

Section: Chapter Questions

Problem 11EA: Markson and Sons leases a copy machine with terms that include a fixed fee each month plus acharge...

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