Chapter 7: Exercises 3, 7, and 11
Chapter 8: Exercises 2, 6, and 9
E7-3 Moonbeam Company manufactures toasters. For the first 8 months of 2017, the
company reported the following operating results while operating at 75% of plant
Sales (350,000 units)
Cost of goods sold
Cost of goods sold was 70% variable and 30% fixed; operating expenses were 80%
variable and 20% fixed.
In September, Moonbeam receives a special order for 15,000 toasters at $7.60 each
from Luna Company of Ciudad Juarez. Acceptance of the order would result in an
additional $3,000 of shipping costs but no increase in fixed costs.
Prepare an incremental analysis for the special order.
Should Moonbeam accept the special order? Why or why not?
E7-7 Riggs Company purchases sails and produces sailboats. It currently produces
1,200 sailboats per year, operating at normal capacity, which is about 80% of full
capacity. Riggs purchases sails at $250 each, but the company is considering using the
excess capacity to manufacture the sails instead. The manufacturing cost per sail would
be $100 for direct materials, $80 for direct labor, and $90 for overhead. The $90
overhead is based on $78,000 of annual fixed overhead that is allocated using normal