Answer:
Wildhorse Company
Incremental Analysis for the special order:
Sales Revenue (4,800 * $4.80) Â Â $23,040
Variable cost (4,800 * $3.09) Â Â Â Â Â 14,832
Contribution margin            $8,208
Fixed overhead increase         5,090
Net Income                    $3,118
b) Wildhorse should accept the special order.
Explanation:
a) Data and Calculations:
Materials         $ 12,342
Labor             36,542
Variable overhead  25,894
Total variable cost $74,778
Unit variable cost $3.09 ($74,778/24,200)
Fixed overhead     47,916
Total           $122,694
Units produced = 24,200
Selling price per unit = $7
Additional cost:
Sales commission = $0.35 per disc
Special order for 4,800 discs at $4.80
Increase in fixed overhead $5,090 ($53,006 - $47,916)