Answer Happy

A. Zane Wheels produces lawn mower tires in batches of 1,200 at a cost of $2.40 each. The tires can be sold without further processing for $5.00 per tire, or can be processed further by injecting solid foam which insures the tires will never become flat. The solid foam tires can be sold for $11.00 each. The additional processing costs total $6,600 per batch. Instructions Compute the incremental income from further production of one batch of solid foam tires. B. Lansing Manufacturers produces can openers. For the first six months of 2017, the company reported the following operating results for 16,000 units, while operating at 80% of plant capacity. Sales $2,000,000 Cost of goods sold 1,200,000 Gross profit 800,000 Operating expenses 420,000 Net income 380,000 Cost of goods sold was 75% variable and 25% fixed. Operating expenses were 60% variable and 40% fixed. In July of 2017, Lansing receives a special order for 2,000 can openers at $85 each from a foreign company. The can openers normally sell for $112.00. Acceptance of the special order would result in $1,000 of shipping costs but no increase in fixed operating expenses. Instructions Prepare an incremental analysis for the special order.