E$3$ Q$16$Variable manufacturing overhead

$.......$

Variable marketing expenses

$...........$

Fixed manufacturing overhead

$.........$

$$2,300,000$ total fixed manufacturing overhead $92,000$ pairs of

sunglasses$|$

Foster Preston Sunglasses sell for about $$125$ per pair. Suppose the company incurs the following average costs per pair:

View the cost information.

deciding whether to accept the order?

Revenue from special order

Less variable expense associated with the order:

Variable manufacturing costs

Contribution margin

Less: Additional fixed expenses associated with the order

Increase $($decrease$)$ in operating income from the special order

In addition to determining the special order's effect on operating profits, Preston's managers also should consider the following:

A$.$ Will lowering the sale price tarnish Foster Preston's image as a high$-$quality brand?

B$.$ How will Foster Preston's competitors react? Will they retaliate by cutting their prices and starting a price war?

C$.$ Will Foster Preston's other customers find out about the lower sale price Foster Preston offered to Nevada Glasses? If so$,$ will these other customers demand lower sale prices?

D$.$ All of the above

E$.$ None of the above

Foster Preston's staff accountants, to explain whether his analysis is correct.

When deciding whether to accept a special order, we should compare the extra revenues we will receive against the

to our decision. This is why comparing the $$64$ price Nevada Glasses offered us with our $$90$ total cost of making and selling the sunglasses is