Gruden company produces golf discs

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Reference no: EM13924163

Gruden Company produces golf discs which it normally sells to retailers for $7.08 each. The cost of manufacturing 22,600 golf discs is:

Materials		$11,074
Labor		32,092
Variable overhead		23,504
Fixed overhead		45,878
Total		$112,548

Gruden also incurs 8% sales commission ($0.57) on each disc sold.

McGee Corporation offers Gruden $5 per disc for 5,100 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Gruden. If Gruden accepts the offer, its fixed overhead will increase from $45,878 to $51,155 due to the purchase of a new imprinting machine. No sales commission will result from the special order.

	Reject Order	Accept Order	Net Income Increase (Decrease)
Revenues	$	$	$
Materials
Labor
Variable overhead
Fixed overhead
Sales commissions
Net income	$	$	$

Reference no: EM13924163

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