Special order decision and considerations (Learning Objective 2)

United Packaging's contribution margin income statement follows:

Wallace Farms wants to buy 5,000 produce boxes from United Packaging. Acceptance of the order will not increase any of United Packaging's variable marketing and administrative expenses or any of its fixed expenses. United Packaging's plant has enough unused capacity to manufacture the additional boxes. Wallace Farms has offered \(\$ 0.80\) per box, which is considerably below the normal sale price of \(\$ 1.20\).
\section*{Requirements}
1. Prepare an incremental analysis to determine whether United Packaging should accept this special sales order.
2. Identify long-term factors that United Packaging should consider in deciding whether to accept the special sales order.

Transcribed Image Text:

Sales in units 360,000 Sales revenue. $432,000 Variable expenses: Manufacturing....... $108,000 Marketing and administrative. 53,000 Total variable expenses. 161,000 Contribution margin. 271,000 Fixed expenses: Manufacturing Marketing and administrative Total fixed expenses... Operating income... 156,000 40,000 196,000 $ 75,000