# Managerial Accounting: E7-3 Leno Company manufactures toasters

Managerial Accounting

Exercise 7-3 Use incremental analysis for special order

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.

Instructions:

a. Prepare an incremental analysis for the special order. (Round computations for per unit cost to 4 decimal places, e.g. 15.2500 and all other computations and final answers to the nearest whole dollar, e.g. 5,725.Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

b. Should Leno Company accept the special order?

Exercise 7-3 Use incremental analysis for special order

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.

Instructions:

a. Prepare an incremental analysis for the special order. (Round computations for per unit cost to 4 decimal places, e.g. 15.2500 and all other computations and final answers to the nearest whole dollar, e.g. 5,725.Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

b. Should Leno Company accept the special order?

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