Reference no: EM13494739

Gruden Company produces golf discs which it normally sells to retailers for $6.87 each. The cost of manufacturing 22,800 golf discs is:

Materials		$11,628
Labor		32,148
Variable overhead		22,572
Fixed overhead		46,512
Total		$112,860

Gruden also incurs 5% sales commission ($0.34) on each disc sold.

McGee Corporation offers Gruden $5 per disc for 5,300 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 $46,512 to $51,412 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.(Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

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

Should Gruden accept the special order?
Gruden should accept reject the special order.