Springfield Company produces golf discs which it normally sells to retailers for $6 each. The cost of manufacturing 25000 golf discs is: $$\begin{array} { l r }
\text { Materials } & \$ 10,000 \
\text { Labor } & 30,000 \
\text { Variable overhead } & 20,000 \
\text { Fixed overhead } & 40,000 \
\text { Total } & \$ 100,000
\end{array}$$ Springfield also incurs 5% sales commission ($0.30) on each disc sold.
Lundy Corporation offers Springfield $5.25 per disc for 5000 discs. Lundy would sell the discs under its own brand name in foreign markets not yet served by Springfield. If Springfield accepts the offer its fixed overhead will increase from $40000 to $45000 due to the purchase of a new imprinting machine. No sales commission will result from the special order.
Instructions
(a) Prepare an incremental analysis for the special order.
(b) Should Springfield accept the special order? Why or why not?

Question

Springfield Company produces golf discs which it normally sells to retailers for $6 each. The cost of manufacturing 25000 golf discs is: $$\begin{array} { l r } 
\text { Materials } & \$ 10,000 \
\text { Labor } & 30,000 \
\text { Variable overhead } & 20,000 \
\text { Fixed overhead } & 40,000 \
\text { Total } & \$ 100,000
\end{array}$$ Springfield also incurs 5% sales commission ($0.30) on each disc sold.
Lundy Corporation offers Springfield $5.25 per disc for 5000 discs. Lundy would sell the discs under its own brand name in foreign markets not yet served by Springfield. If Springfield accepts the offer its fixed overhead will increase from $40000 to $45000 due to the purchase of a new imprinting machine. No sales commission will result from the special order.
Instructions
(a) Prepare an incremental analysis for the special order.
(b) Should Springfield accept the special order? Why or why not?

Quizplus · Accepted Answer

The Answer of Springfield Company produces golf discs which it normally sells to retailers for $6 each. The cost of manufacturing 25000 golf discs is: $$\begin{array} { l r } 
\text { Materials } & \$ 10,000 \
\text { Labor } & 30,000 \
\text { Variable overhead } & 20,000 \
\text { Fixed overhead } & 40,000 \
\text { Total } & \$ 100,000
\end{array}$$ Springfield also incurs 5% sales commission ($0.30) on each disc sold.
Lundy Corporation offers Springfield $5.25 per disc for 5000 discs. Lundy would sell the discs under its own brand name in foreign markets not yet served by Springfield. If Springfield accepts the offer its fixed overhead will increase from $40000 to $45000 due to the purchase of a new imprinting machine. No sales commission will result from the special order.
Instructions
(a) Prepare an incremental analysis for the special order.
(b) Should Springfield accept the special order? Why or why not?

Springfield Company Produces Golf Discs Which It Normally Sells to Retailers