BuoyBuoy

manufactures flotation vests in

Atlanta comma GeorgiaAtlanta, Georgia.

Buoy'sBuoy's

contribution margin income statement for the most recent month contains the following data:

Buoy
Contribution Margin Income Statement (Variable Costing)
For Sales Volume of 31,000 Units
		Total
	Sales revenue	$434,000
	Less variable expenses:
	Variable manufacturing costs (DM, DL, Variable MOH)	93,000
	Variable operating expenses (selling and administrative)	108,000
	Contribution margin	$233,000
	Less fixed expenses:
	Fixed manufacturing overhead	$121,000
	Fixed operating expenses (selling and administrative)	95,000
	Operating income (loss)	$17,000

Requirement 1. Prepare an incremental analysis to determine whether

BuoyBuoy

should accept this special sales order. (Enter a "0" for any zero balances. Use parentheses or a minus sign to indicate a negative contribution marginand/or a decrease in operating income from the special order.)

		Total Order
Incremental Analysis of Special Sales Order Decision	Per Unit	(5,100 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:

Accept the special sales order.

Reject the special sales order.

Requirement 2. Identify long-term factors

BuoyBuoy

should consider in deciding whether to accept the special sales order.

In addition to determining the special order's effect on operating profits,

BuoyBuoy's

managers also should consider the following:

A.

How will

BuoyBuoy's

competitors react? Will they retaliate by cutting their prices and starting a price war?

B.

Will lowering the sale price tarnish

BuoyBuoy's

image as a quality brand?

C.

Will

BuoyBuoy's

other customers find out about the lower sale price

BuoyBuoy

accepted from

OvertonOverton?

If so, will these other customers demand lower sale prices?

D.

All of the above.

E.

None of the above.