Blowing Sand Company has just received a one-time offer to purchase 9,600 units of its Gusty model for a price of $31 each. The Gusty model costs $37 to produce ($26 in variable costs and $11 of fixed overhead) Because the offer came during a slow production month, Blowing Sand has enough excess capacity to accept the order. 1. Should Blowing Sand accept the special order? Yes No 2. Calculate the increase or decrease in short-term profit from accepting the special order. by Blowing Sand Company produces the Drafty model fan, which currently has a net loss of $44,000 as follows: Drafty Model $260,000 182,000 78,000 70,000 $ 8,000 52,000 $ (44,000 Sales revenue Less: Variable costs Contribution margin Segment margin Net operating income (loss) Less: Direct fixed costs Less: Common fixed costs Eliminating the Drafty product line would eliminate $70,000 of direct fixed costs. The $52,000 of common fixed costs would be redistributed to Blowing Sand's remaining product lines. Will Blowing Sand's net operating income increase or decrease if the Drafty model is eliminated? By how much? Total Proft by Anne Sugar makes large ceramic pots for use in outdoor landscaping. She currently has two models, one square and the other round. Because of the size of Anne's creations, only one pot can be fired in the kiln at a time. Information about each model follows Square Sales price Variable cost Firing time $95 $20 2.5 hours Round $133 $35 3.5 hours Assume that Anne can sell as many pots as she can create but that she is limited as to the number of hours that the kin can be run. Compute the contribution margin per unit and contribution margin per hour of firing time Square Ceramic Pot Round Ceramic Pot Contribution Margin per Unit Contribution Margin per Hour Which type of pot should Anne produce to maximize her short-term profit? square Ceramic Pot round Ceramic Pot Both