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Cozy Products manufactures t-shirts. It has the following costs when its production level is 85,000 units (t-shirts): Click the icon to view the costs.) (Click
Cozy Products manufactures t-shirts. It has the following costs when its production level is 85,000 units (t-shirts): Click the icon to view the costs.) (Click the icon to view additional information.) What will happen to Cozy's operating income if it accepts this special order? Complete the following incremental analysis to determine the impact on Cozy's operating income if it accepts this special order. (Round all per unit amounts to the nearest cent, $X.XX, and all other amounts to the nearest whole dollar. Enter a "0" for any zero balances. Use parentheses or a minus sign to indicate a decrease in contribution margin and/or operating income from the special order.) Total Order (8,500 units) Per Unit Incremental Analysis of Special Sales Order Decision Revenue from special order Less variable expense associated with the order: Direct materials Direct labor Variable manufacturing overhead Contribution margin Less: Additional fixed expenses associated with the order Increase (decrease) in operating income from the special order The company's relevant range extends to 98,500 units. Cozy has received a special order for 8,500 t-shirts at a special price of $38,250 for the entire order. The special order t-shirt would use a fabric that is less expensive than the standard fabric used by Cozy, which would allow Cozy to save $0.25 per t-shirt in direct materials when manufacturing this special order. Cozy has the excess capacity to manufacture this special order. Its total fixed costs will not be impacted by the special order. Direct materials Total costs for 85,000 units 263,500 42,500 93,500 80,000 Direct labor Variable manufacturing overhead Fixed manufacturing overhead 479,500 Total manufacturing costs
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