Reference no: EM13524396

Carter Company manufactures cappuccino makers. For the first eight months of the year 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, Carter Company receives a special order for 40,000 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.

Instructions

(a) Prepare an incremental analysis for the special order. Should Carter Company accept the special order? Justify your answer.