Good Cabin Company manufactures cappuccino makers. For the first ten months of 2016 the company reported the following operating results while operating at 80% of plant capacity: $\begin{array}{lr}
\text { Sales (500,000 units) } & \$ 90,000,000 \
\text { Cost of goods sold } & \$ 4,000,000 \
\text { Gross profit } & 36,000,000 \
\text { Operating expenses } & 24,000,000 \
\text { Net income } & \$ 12,000,000
\end{array}$ An analysis of costs and expenses reveals that variable cost of goods sold is $85 per unit and variable operating expenses are $35 per unit.
In November Good Cabin Company receives a special order for 30000 machines at $135 each from a major coffee shop franchise. Acceptance of the order would result in $10000 of shipping costs but no increase in fixed expenses.
Instructions
(a) Prepare an incremental analysis for the special order.
(b) Should Good Cabin Company accept the special order? Justify your answer.

Question

Good Cabin Company manufactures cappuccino makers. For the first ten months of 2016 the company reported the following operating results while operating at 80% of plant capacity: $\begin{array}{lr}
\text { Sales (500,000 units) } & \$ 90,000,000 \
\text { Cost of goods sold } & \$ 4,000,000 \
\text { Gross profit } & 36,000,000 \
\text { Operating expenses } & 24,000,000 \
\text { Net income } & \$ 12,000,000
\end{array}$  An analysis of costs and expenses reveals that variable cost of goods sold is $85 per unit and variable operating expenses are $35 per unit.
In November Good Cabin Company receives a special order for 30000 machines at $135 each from a major coffee shop franchise. Acceptance of the order would result in $10000 of shipping costs but no increase in fixed expenses.
Instructions
(a) Prepare an incremental analysis for the special order.
(b) Should Good Cabin Company accept the special order? Justify your answer.

Quizplus · Accepted Answer

The Answer of Good Cabin Company manufactures cappuccino makers. For the first ten months of 2016 the company reported the following operating results while operating at 80% of plant capacity: $\begin{array}{lr}
\text { Sales (500,000 units) } & \$ 90,000,000 \
\text { Cost of goods sold } & \$ 4,000,000 \
\text { Gross profit } & 36,000,000 \
\text { Operating expenses } & 24,000,000 \
\text { Net income } & \$ 12,000,000
\end{array}$  An analysis of costs and expenses reveals that variable cost of goods sold is $85 per unit and variable operating expenses are $35 per unit.
In November Good Cabin Company receives a special order for 30000 machines at $135 each from a major coffee shop franchise. Acceptance of the order would result in $10000 of shipping costs but no increase in fixed expenses.
Instructions
(a) Prepare an incremental analysis for the special order.
(b) Should Good Cabin Company accept the special order? Justify your answer.

Good Cabin Company Manufactures Cappuccino Makers An Analysis of Costs and Expenses Reveals That Variable Cost