Founded in 1983, the Beverly Hills Fan Company is located in Woodland Hills, California. With 23 employees and sales of less than $10 million, the company is relatively small.

Management feels that there is potential for growth in the upscale market for ceiling fans and lighting. They are particularly optimistic about growth in Mexican and Canadian markets.

Presented on the next page is information from the president’s letter in the company’s annual report.

Instructions

(a) What points did the company management need to consider before deciding to offer the special-
order fans to customers?

(b) How would incremental analysis be employed to assist in this decision?
MANAGERIAL ACCOUNTING ON THE WEB

Transcribed Image Text:

BEVERLY HILLS FAN COMPANY President's Letter An aggressive product development program was initiated during the past year resulting in new ceiling fan models planned for introduction next year. Award-winning industrial designer Ron Rezek created several new fan models for the Beverly Hills Fan and L.A. Fan lines, including a new Showroom Collection, designed specifically for the architectural and designer markets. Each of these models has received critical acclaim, and order commitments for next year have been outstanding. Additionally, our Custom Color and special-order fans continued to enjoy increasing popularity and sales gains as more and more customers desire fans that match their specific interior decors. Currently, Beverly Hills Fan Company offers a product line of over 100 models of contemporary, traditional, and transitional ceiling fans.