Data table Direct materials Direct labor Variable manufacturing overhead Variable selling expenses Fixed manufacturing overhead Total cost $ 38 13 12 2 $20* $ 85 * $2,050,000 Total fixed manufacturing overhead / 102,500 Pairs of sunglasses Print Done - San Jose Sunglasses sell for about $150 per pair. Suppose that the company incurs the following average costs per pair: (Click the icon to view the cost information.) San Jose has enough idle capacity to accept a one-time-only special order from Montana Shades for 26,000 pairs of sunglasses at $84 per pair. San Jose will not incur any variable selling expenses for the order. Read the requirements. Requirement 1. How would accepting the order affect San Jose's operating income? In addition to the special order's effect on profits, what other (longer-term qualitative) factors should San Jose's managers consider in deciding whether to accept the order? Prepare the analysis to determine the effect on operating income. (Enter decreases to profits with a parentheses or minus sign.) Expected increase in revenues Expected increase in expenses Expected sunglasses x sunglasses x in operating income In addition to the special order's effect on profits, what other (longer-term qualitative) factors should San Jose's managers consider in deciding whether to accept the order? A. Will lowering the sale price tarnish San Jose's image as a high-quality brand? B. Will San Jose's other customers find out about the lower sale price San Jose offered to Montana Shades? If so, will these other customers demand lower sale prices? C. How will San Jose'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 Requirement 2. San Jose's marketing manager, Peter Root, argues against accepting the special order because the offer price of $84 is less than San Jose's $85 cost to make the sunglasses. Root asks you, as one of San Jose's staff accountants, to explain whether his analysis is correct. What would you say? When deciding whether to accept a special order, we should compare the Costs that we will incur whether or not we fill the order are to our decision. This is why comparing the $84 price Montana Shades offered us with our $85 total cost of making the sunglasses is The additional revenues and the additional costs that we will incur to fill the special order are If we accept the Montana Shades special order, we will incur only of additional cost per pair, which is than the $84 per pair that Montana Shades offered. Therefore, we should the special order to the company's operating income