Ch 10 Principal Managerial Accounting

Data table Aqua Fun Income Statement For the Month Ended May 31, 2024 Sales in Units 42,000 Net Sales Revenue 672,000 Variable Costs: Manufacturing 210,000 Selling and Administrative 107,000 Total Variable Costs 317,000 Contribution Margin 355,000 Fixed Costs: Manufacturing 129,000 89,000 Selling and Administrative Total Fixed Costs 218,000 137,000 Operating Income Requirements 1. Identify each cost in the income statement as either relevant or irrelevant to Aqua Fun's decision. 2. Prepare a differential analysis to determine whether Aqua Fun should accept this special sales order. 3. Identify long-term factors Aqua Fun should consider in deciding whether to accept the special sales order. Aqua Fun manufactures flotation vests in Charleston, South Carolina. Aqua Fun's contribution margin income statement for the month ended May 31, 2024, contains the following data: (Click the icon to view the cost information.) Suppose Floatsie wishes to buy 4,000 vests from Aqua Fun. Aqua Fun will not incur any variable selling and administrative expenses on the special order. The Aqua Fun plant has enough unused capacity to manufacture the additional vests. Floatsie has offered $6 per vest, which is below the normal sales price of $16. Read the requirements. Requirement 1. Identify each cost in the income statement as either relevant or irrelevant to Aqua Fun's decision. Variable Manufacturing Costs Variable Selling and Administrative Costs Fixed Manufacturing Costs Fixed Selling and Administrative Costs Requirement 2. Prepare a differential analysis to determine whether Aqua Fun should accept this special sales order. (Enter decreases to revenue or increases to costs with a parentheses or minus sign.) in operating income Decision: Requirement 3. Identify long-term factors Aqua Fun should consider in deciding whether to accept the special sales order. In addition to determining the special order's effect on operating profits, Aqua Fun's managers also should consider the following: A. Will the special order customer come back again and again, asking for the same reduced price? B. How will Aqua Fun's competitors react? Will they retaliate by cutting their prices and starting a price war? C. Will Aqua Fun's other customers find out about the lower sale price Aqua Fun accepted from Floatsie? If so, will these other customers demand lower sale prices? D. All of the above E. None of the above