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2. Aqua Fun manufactures flotation vests in Charleston, South Carolina. Aqua Fun's contribution margin income statement for the month ended December 31, 2018, contains the
2. Aqua Fun manufactures flotation vests in Charleston, South Carolina. Aqua Fun's contribution margin income statement for the month ended December 31, 2018, contains the following data: (Click the icon to view the cost information.) Read the requirements Suppose Overboard wishes to buy 4,800 vests from Aqua Fun. Aqua Fun will not incur any variable selling and administrative expenses on the special order. The Aqua Fun plant has enough unused capacity to manufacture the additional vests. Overboard has offered $9 per vest, which below the normal sales price of $17. Requirement 1. Identify each cost in the income statement as either relevant or irrelevant to Aqua Fun's decision. Variable Manufacturing Costs (1) Variable Selling and Administrative Costs (2) Fixed Manufacturing Costs (3) Fixed Selling and Administrative Costs (4) Requirement 2. Prepare a differential analysis to determine whether Aqua Fun should accept this special sales order. (Enter decreases to revenue or increases to costs with a parentheses or minus sign.) (5) (6) (7) in operating income Decision: (8) Requirement 3. Identify long-term factors Aqua Fun should consider in deciding whether to accept the special sales order. In addition to determining the special order's effect on operating profits, Aqua Fun's managers also should consider the following: O A. How will Aqua Fun's competitors react? Will they retaliate by cutting their prices and starting a price war? OB. Will the special order customer come back again and again, asking for the same reduced price? O c. Will Aqua Fun's other customers find out about the lower sale price Aqua Fun accepted from Overboard? If so, will these other customers demand lower sale prices? OD. All of the above O E. None of the above 3: Data Table Aqua Fun Income Statement For the Month Ended December 31, 2018 Sales in Units 30,000 Net Sales Revenue $ 510,000 Variable Costs: Manufacturing 150,000 112,000 Selling and Administrative 262,000 Total Variable Costs 248,000 Contribution Margin Fixed Costs: Manufacturing 122,000 95,000 Selling and Administrative Total Fixed Costs 217,000 $ 31,000 Operating Income
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