Gruden Company_Accept or reject Special order

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Gruden Company produces golf discs which it normally sells to retailers for $7.24 each. The cost of manufacturing 15,300 golf discs is:
               
Materials $7,497            
Labor         22,644            
Variable Overhead        16,677            
Fixed Overhead        30,753            
Total         77,571            
               
Gruden also incurs 6% sales commission ($0.43) on each disc sold.        
               
 McGee Corporation offers Gruden $5 per disc for 4,700 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 $30,753 to $36,164 due to the purchase of a new imprinting machine. No sales commission will result from the special order. 
    • 11 years ago
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