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Arthur Cole Sunglasses sell for about $125 per pair. Suppose the company incurs the following average costs per pair (Click the icon to view the
Arthur Cole Sunglasses sell for about $125 per pair. Suppose the company incurs the following average costs per pair (Click the icon to view the cost information.) Arthur Cole has enough idle capacity to accept a one-time-only special order from Nevada Glasses for 20,000 pairs of sunglasses at $75 per pair. Arthur Cole will not incur any variable marketing expenses for the order. Read the requirements. Requirement 1. How would accepting the order affect Arthur Cole's operating income? In addition to the special order's effect on profits, what other (longer-term qualitative) factors should Arthur Cole's managers consider in deciding whether to accept the order? Prepare an incremental analysis to determine the special order's effect on operating income. (Enter a "0" for any zero balances. Use parentheses or a minus sign to indicate a decrease in operating income from the special order.) Incremental Analysis of Special Sales Order Decision Per Unit 5000 Total Order (20,000 units) 2500000|| Revenue from special order Less variable expense associated with the order: Variable manufacturing costs 1500000 Contribution margin 1,000,000 Less: Additional fixed expenses associated with the order Increase (decrease) in operating income from the special order 1,000,000 * Requirements - X 1. How would accepting the order affect Arthur Cole's operating income? In addition to the special order's effect on profits, what other (longer-term qualitative) factors should Arthur Cole's managers consider in deciding whether to accept the order? 2. Arthur Cole's marketing manager, Jim Revo, argues against accepting the special order because the offer price of $75 is less than Arthur Cole's $90 cost to make the sunglasses. Revo asks you, as one of Arthur Cole's staff accountants, to explain whether his analysis is correct. Print Done Arthur Cole Sunglasses sell for about $125 per pair. Suppose the company incurs the following average costs per pair (Click the icon to view the cost information.) Arthur Cole has enough idle capacity to accept a one-time-only special order from Nevada Glasses for 20,000 pairs of sunglasses at $75 per pair. Arthur Cole will not incur any variable marketing expenses for the order. Read the requirements. Requirement 1. How would accepting the order affect Arthur Cole's operating income? In addition to the special order's effect on profits, what other (longer-term qualitative) factors should Arthur Cole's managers consider in deciding whether to accept the order? Prepare an incremental analysis to determine the special order's effect on operating income. (Enter a "0" for any zero balances. Use parentheses or a minus sign to indicate a decrease in operating income from the special order.) Incremental Analysis of Special Sales Order Decision Per Unit 5000 Total Order (20,000 units) 2500000|| Revenue from special order Less variable expense associated with the order: Variable manufacturing costs 1500000 Contribution margin 1,000,000 Less: Additional fixed expenses associated with the order Increase (decrease) in operating income from the special order 1,000,000 * Requirements - X 1. How would accepting the order affect Arthur Cole's operating income? In addition to the special order's effect on profits, what other (longer-term qualitative) factors should Arthur Cole's managers consider in deciding whether to accept the order? 2. Arthur Cole's marketing manager, Jim Revo, argues against accepting the special order because the offer price of $75 is less than Arthur Cole's $90 cost to make the sunglasses. Revo asks you, as one of Arthur Cole's staff accountants, to explain whether his analysis is correct. Print Done
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