Gruner Company produces golf discs which it normally sells to retailers for $6.94 each. The cost of manufacturing 18,800 golf discs is:Materials $9400 Labor $26320 Variable overhead $20,492 Fixed overhead $37,976 Total $94,188.
Gruner also incurs 6% sales commission ($0.42) on each disc sold.
Travis Corporation offers Gruner $4.87 per disc for 5900 discs. Travis would sell the discs under its own brand name in foreign markets not yet served by Gruner. If Gruner accepts the offer, its fixed overhead will increase from $37976 to $42509 due to the purchase of a new imprinting machine. No sales commission will result from the special order.
Prepare an incremental analysis for the special order.
Should Gruner accept the special order?