Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Data table Deep Blue manufactures flotation vests in Charlotte, North Carolina. Deep Blue's contribution margin income statement for the most recent month contains the following
Data table Deep Blue manufactures flotation vests in Charlotte, North Carolina. Deep Blue's contribution margin income statement for the most recent month contains the following data: (Click the icon to view the cost information.) Suppose Boat Safety Cruiselines wants to buy 5,500 vests from Deep Blue. Acceptance of the order will not require any variable selling and administrative expenses. The special order will not affect fixed expenses. The Deep Blue plant has enough unused capacity to manufacture the additional vests. Boat Safety Cruiselines has offered $9 per vest, which is below the normal sale price of $16. Doad the ranuiramante Requirement 1. Prepare an incremental analysis to determine whether Deep Blue should accept this special sales order. (Enter a "0" 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.) Requirement 2. Identify long-term factors Deep Blue should consider in deciding whether to accept the special sales order. In addition to determining the special order's effect on operating profits, Deep Blue's managers also should consider the following: A. Will lowering the sale price tarnish Deep Blue's image as a quality brand? B. Will Deep Blue's other customers find out about the lower sale price Deep Blue accepted from Boat Safety? If so, will these other customers demand lower sale prices? C. How will Deep Blue's competitors react? Will they retaliate by cutting their prices and starting a price war? D. All of the above. E. None of the above
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started