Aqua Fun manufactures flotation vests in Charleston, South Carolina. Aqua Fun's contribution margin income statement for the month ended December $31,2024,$ contains the following data:

$($Click the icon to view the cost information.$)$

Read the requirements.

Suppose Overtown wishes to buy $4,400$ 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. Overtown has offered $$10$ per vest, which is below the normal sales price of $$15.$

Requirement $1.$ Identify each cost in the income statement as either relevant or irrelevant to Aqua Fun's decision.

Variable Manufacturing Costs

Variable Selling and Administrative Costs

Fixed Manufacturing Costs

Fixed Selling and Administrative Costs

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.$)$

in operating income

Decision:

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:

A$.$ How will Aqua Fun's competitors react? Will they retaliate by cutting their prices and starting a price war?

B$.$ Will the special order customer come back again and again, asking for the same reduced price?

C$.$ Will Aqua Fun's other customers find out about the lower sale price Aqua Fun accepted from Overtown? If so$,$ will these other customers demand lower sale prices?

D$.$ All of the above

E$.$ None of the above

Requirements

Identify each cost in the income statement as either relevant or irrelevant to Aqua Fun's decision.

Prepare a differential analysis to determine whether Aqua Fun should accept this special sales order.

Identify long$-$term factors Aqua Fun should consider in deciding whether to accept the special sales order.