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Cole Sunglasses sell for about $150 per pair. Suppose the company incurs the following average costs per pair: (Click the icon to view the cost
Cole Sunglasses sell for about $150 per pair. Suppose the company incurs the following average costs per pair: (Click the icon to view the cost information.) Cole has enough idle capacity to accept a one-time-only special order from Lens Masters for 22,000 pairs of sunglasses at $66 per pair. Cole will not incur any variable marketing expenses for th order. Requirement 1. How would accepting the order affect Cole's operating income? In addition to the special order's effect on profits, what other (longer-term qualitative) factors should Cole's manas consider in deciding whether to accept the order? Prepare the analysis to determine the effect on operating income. (Enter a zero, " 0 ", in an input box if there is no expected change in the expense. Use parentheses or a minus sign for a expected decrease in operating income.) 1. How would accepting the order affect Cole's operating income? In addition to the special order's effect on profits, what other (longer-term qualitative) factors should Cole's managers consider in deciding whether to accept the order? 2. Cole's marketing manager, Jim Revo, argues against accepting the special order because the offer price of $66 is less than Cole's $75 cost to make the sunglasses. Revo asks you, as one of Cole's staff accountants, to write a memo explaining whether his analysis is correct. Direct materials. 40 Direct labour. 15 Variable manufacturing overhead. 7 Variable marketing expenses. ...................... 3 * $2,600,000 total fixed manufacturing overhead / 260,000 pairs of sunglasses
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