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Leno Company

Price: $1.99

Leno Company manufactures toasters. For the first 8 months of 2014, the company
reported the following operating results while operating at 75% of plant capacity:

Sales (350,000 units)  4,375,000
Cost of goods sold  2,600,000
Gross profit  1,775,000
Operating expenses  840,000
Net income  935,000

Cost of goods sold was 70% variable and 30% fixed; operating expenses were 75% variable
and 25% fixed.

In September, Leno Company receives a special order for 15,000 toasters at $7.60 each
from Centro Company of Ciudad Juarez. Acceptance of the order would result in an additional
$3,000 of shipping costs but no increase in fixed operating expenses.

(a) Prepare an incremental analysis for the special order.
(b) Should Leno Company accept the special order? Why or why not?

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