Jim-Mate Company Supplies Schools with Floor Mattresses to Use in Physical

Essay

Jim-Mate Company supplies schools with floor mattresses to use in physical education classes. Jim-Mate has received a special order from a large school district to buy 700 mats at $55 each. Acceptance of the special order will not affect fixed costs but will result in $1500 of shipping costs.
For the first 7 months of 2016 the company reported the following operating results while operating at 75% capacity: $$\begin{array} { l r } \text { Sales (100,000 units) } & \$ 9,000,000 \\\text { Cost of goods sold } & 5,300,000 \\\text { Gross profit } & 3,700,000 \\\text { Operating expenses } & 2,500,000 \\\text { Net income } & \$ 1,200,0000 \\\end{array}$$ Cost of goods sold was 70% variable and 30% fixed; operating expenses were 75% variable and 25% fixed.
Instructions
(a) Prepare an incremental analysis for the special order.
(b) Should Jim-Mate Company accept the special order? Justify your answer.