Gregg Company Supplies Schools with Floor Mattresses to Use in Physical

Essay

Gregg Company supplies schools with floor mattresses to use in physical education classes. Gregg has received a special order from a large school district to buy 600 mats at $45 each. Acceptance of the special order will not affect fixed costs but will result in $1,200 of shipping costs.
For the first 6 months of 2010, the company reported the following operating results while operating at 80% capacity:
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 Gregg Company accept the special order? Justify your answer.