Assignment: Chapter 8 Homework 13. Coastal Safety manufactures flotation vests in Miami, Florida. Coastal Safety's contribution margin income statement for the most recent month contains the following data: (Click the icon to view the cost information.) Suppose Dazzle Cruiselines wants to buy 4,600 vests from Coastal Safety. Acceptance of the order will not require any variable selling and administrative expenses. The special order will not affect fixed expenses. The Coastal Safety plant has enough unused capacity to manufacture the additional vests. Dazzle Cruiselines has offered S7 per vest, which is below the normal sale price of $15. Read the requirements Requirement 1. Prepare an incremental analysis to determine whether Coastal Safety should accept this special sales order. (Enter a "O" for any zero balances. Use parentheses or a minus sign to indicate a negative contribution margin and/or a decrease in operating income from the special order.) Total Order (4,600 units) Incremental Analysis of Special Sales Order Decision Per Unit Revenue from special order Less variable expense associated with the order: Variable manufacturing costs Contribution margin Less: Additional fixed expenses associated with the order Increase (decrease) in operating income from the special order Decision: (1) Requirement 2. Identify long-term factors Coastal Safety should consider in deciding whether to accept the special sales order. In addition to determining the special order's effect on operating profits, Coastal Safety's managers also should consider the following: O A. How will Coastal Safety's competitors react? Will they retaliate by cutting their prices and starting a price war? OB. Will lowering the sale price tarnish Coastal Safety's image as a quality brand? O C . Will Coastal Safety's other customers find out about the lower sale price Coastal Safety accepted from Dazzle? If so, will these other customers demand lower sale prices? OD. All of the above. O E. None of the above 1: Data Table Coastal Safety Contribution Margin Income Statement (Variable Costing) For Sales Volume of 32,000 Units Total Sales revenue 480,000 Less variable expenses: Variable manufacturing costs (DM, DL, Variable MOH) 160,000 112,000 208,000 Variable operating expenses (selling and administrative) Contribution margin Less fixed expenses: Fixed manufacturing overhead 126,000 91,000 Fixed operating expenses (selling and administrative) (9,000) Operating income (loss) 2: Requirements 1. Prepare an incremental analysis to determine whether Coastal Safety should accept this special sales order. 2. Identify long-term factors Coastal Safety should consider in deciding whether to accept the special sales order, (1) O Accept the special sales order O Reject the special sales order
