Reference no: EM133129454
Problem - The Caldwell Company manufactures cappuccino makers. For the first eight months of 2017 the company reported the following operating results while operating at 80% of plant capacity:
Sales (500,000 units) $75,000,000
Cost of goods sold 45,000,000
Gross profit 30,000,000
Operating expenses 24,000.000
Net income $6,000,000
An analysis of costs and expenses reveals that variable cost of goods sold is $80 per unit and variable operating expenses are $30 per unit.
In September, Caldwell Company receives a special order for 25,000 machines at $120 each from a major coffee shop franchise. Acceptance of the order would result in $10.000 of shipping costs but no increase in fixed expenses.
Required -
a) Prepare an incremental analysis for the special order.
b) Should Caldwell Company accept the special order? Justify your answer.