Buoy manufactures flotation vests in San Diego, California. Buoy's contribution margin income statement for the most recent month contains the following data: Click the icon to view the cost information) Suppose Summer Sports Cruiselines wants to buy 5,700 vests from Buoy. Acceptance of the order will not require any variable selling and administrative expenses. The special order will not affect fixed expenses. The Buoy plant has enough unused capacity to manufacture the additional vests. Summer Sports Cruiselines has offered $11 per vest, which is below the normal sale price of $16. Read the requirements Requirement 1. Prepare an incremental analysis to determine whether Buoy 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 Incremental Analysis of Special Sales Order Decision Per Unit (5,700 units) 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: Requirement 2. Identify long-term factors Buoy should consider in deciding whether to accept the special sales order In addition to determining the special order's effect on operating profits, Buoy's managers also should consider the following: O A How will Buoy's competitors react? Will they retaliate by cutting their prices and starting a price war? OB. Will lowering the sale price tarnish Buoy's image as a quality brand? OC. Will Buoy's other customers find out about the lower sale price Buoy accepted from Summer Sports? If so, will these other customers demand lower sale prices? D. All of the above. E. None of the above Data Table - A B 1 1 Buoy 2 Contribution Margin Income Statement (Variable Costing) 3 For Sales Volume of 28,000 Units 4 Total $ 448,000 5 Sales revenue 6 Less variable expenses: 8 196,000 104.000 148,000 $ $ 7 Variable manufacturing costs (DM, DL, Variable MOH) 8 Variable operating expenses (selling and administrative) 9 Contribution margin 10 Less fixed expenses: 11 Fixed manufacturing overhead 12 Fixed operating expenses (selling and administrative) 13 Operating income (loss) $ 124,000 89,000 (65,000) $ Print Done Requirements - X 1. Prepare an incremental analysis to determine whether Buoy should accept this special sales order. 2. Identify long-term factors Buoy should consider in deciding whether to accept the special sales order. Print Done Per Unit Incremental Analysis of Special Sales Order Decision 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: Requirem ould consider in deciding whether to accept Accept the special sales order. In addition on operating profits, Buoy's managers also Reject the special sales order. A. Ho.. wwwy MUI TUUU .....sy retaliate by cutting their prices and starting
