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Sylvan White Sunglasses sell for about $135 per pair. Suppose the company incurs the following average costs per pair: g (Click the icon to view the cost information.) Sylvan White has enough idle capacity to accept a one-time-only special order from Colorado Glasses for 18,000 pairs of sunglasses at $72 per pair. Sylvan White will not incur any variable marketing expenses for the order. Read the @uirements. Total Order Incremental Analysis of Special Sales Order Decision Per Unit (18,000 units) Revenue from special order I: |:| Less variable expense associated with the order: Variable manufacturing costs :l :l Contribution margin = Less: Additional fixed expenses associated with the order l;l Increase (decrease) in operating income from the special order l;l Enter any number in the edit fields and then click Check Answer. Data Table Direct materials Direct labor Variable manufacturing overhead ....... Variable marketing expenses Fixed manufacturing overhead Total cost * $2,100,000 total fixed manufacturing overhead + 105,000 pairs of sunglasses Requirements 1. How would accepting the order affect Sylvan White's operating income? In addition to the special order's effect on prots, what other (longer-term qualitative) factors should Sylvan White's managers consider in deciding whether to accept the order? 2. Sylvan White's marketing manager, Jim Revo, argues against accepting the special order because the offer price of $72 is less than Sylvan White's $87 cost to make the sunglasses. Revo asks you. as one of Sylvan White's staff accountants, to explain whether his analysis is correct. Top managers of Maine Flooring are alarmed by their operating losses. They are considering dropping the laminate flooring product line. Company accountants have prepared the following analysis to help make this decision: (Click the icon to view the analysis.) Total fixed costs will not change if the company stops selling laminate flooring. Read the requirements. . . . . . Requirement 1. Prepare an incremental analysis to show whether Maine Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $22,000 to operating income? Explain. (Enter a "0" in an input field if there is no expected change as a result of discontinuing the laminate flooring product in this scenario.) Incremental Analysis for Discontinuation Decision Total Contribution margin lost if laminate flooring product line is dropped Less: Fixed cost savings if laminate flooring product line is dropped Operating income if laminate flooring is dropped Choose from any list or enter any number in the input fields and then click Check Answer.3 For the Year 4 Product lines Laminate 5 Wood flooring flooring Company Total 6 Sales revenue $ 302,000 122,000 424,000 7 Less: Variable expenses 154,000 74,000 228,000 Contribution margin CA 148,000 $ 48,000 $ 196,000 9 Less fixed expenses: 10 Manufacturing 71,000 59,000 130,000 11 Marketing and administrative 56,000 11,000 67,000 12 Operating income (loss) 21,000 $ (22,000) $ (1,000)1. Prepare an incremental analysis to show whether Maine Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $22,000 to operating income? Explain. 2. Assume that the company can avoid $23,000 of fixed expenses by discontinuing the laminate flooring product line (these costs are direct fixed costs of the laminate flooring product line). Prepare an incremental analysis to show whether the company should stop selling laminate flooring. 3. Now, assume that all of the fixed costs assigned to laminate flooring are direct fixed costs and can be avoided if the company stops selling laminate flooring. However, marketing has concluded that wood flooring sales would be adversely affected by discontinuing the laminate flooring line (retailers want to buy both from the same supplier). Wood flooring production and sales would decline 10%. What should the company do?Each morning, Max Cole stocks the drink case at Max's Beach Hut in Virginia Beach, Virginia. Max's Beach Hut has 120 linear feet of refrigerated display space for cold drinks. Each linear foot can hold either six 12-ounce cans or three 20-ounce plastic or glass bottles. a (Click the icon to view the information on the cold drinks.) The beverage stand can sell all drinks stocked in the display case each morning. Read the @uirements. Requirement 1. What is the constraining factor at Max's Beach Hut? What should Max stock to maximize prots? What is the maximum contribution margin he could generate from refrigerated drinks each day? The constraining factor is l:l. Max's should stock the drink with the El contribution margin. Data Iable The beverage stand sells three types of cold drinks: 1. Just Cola in 12-02. cans for $1.45 per can 2. Fizzle Pop in 20-oz. plastic bottles for $1.75 per bottle 3. Tobe - Cola in 20-oz. glass bottles for $2.10 per bottle Max's Beach Hut pays its suppliers the following: 1. $0.25 per 12-oz. can of just - cola 2. $0.40 per 20-oz. bottle of zzle pop 3. $0.70 per 20oz. bottle of tobe - cola Max's Beach Hut's monthly xed expenses include the following: Hut rental ............ $ Refrigerator rental Max's salary Total fixed expenses Requirements 1. What is the constraining factor at Max's Beach Hut? What should Max stock to maximize prots? What is the maximum contribution margin he could generate from refrigerated drinks each day? 2. To provide variety to customers, suppose Max refuses to devote more than 65 linear feet and no less than 15 linear feet to any individual product. Under this condition, how many linear feet of each drink should be stocked? How many units of each product will be available for sale each day? 3. Assuming the product mix calculated in Requirement 2, what contribution margin will be generated from refrigerated drinks each day? l\\
