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Ease Products manufactures t-shirts. It has the following costs when its production level is 95,000 units (t-shirts): (Click the icon to view the costs.)
Ease Products manufactures t-shirts. It has the following costs when its production level is 95,000 units (t-shirts): (Click the icon to view the costs.) (Click the icon to view additional information.) What will happen to Ease's operating income if it accepts this special order? Complete the following incremental analysis to determine the impact on Ease's operating income if it accepts this special order. (Round all per unit amounts to the nearest cent, SX.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 Incremental Analysis of Special Sales Order Decision Per Unit (9,500 units) Revenue from special order 6.25 59375 Less variable expense associated with the order: Direct materials 2.65 25175 Direct labor Variable manufacturing overhead Contribution margin Less: Additional fixed expenses associated with the order Increase (decrease) in operating income from the special order Data table. 5 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total manufacturing costs Total costs for 95,000 units 313,500 23,750 71,250 80,000 488.500 More info The company's relevant range extends to 109,500 units. Ease has received a special order for 9,500 t-shirts at a special price of $59,375 for the entire order. The special order t-shirt would use a fabric that is less expensive than the standard fabric used by Ease, which would allow Ease to save $0.65 per t-shirt in direct materials when manufacturing this special order. Ease has the excess capacity to manufacture this special order. Its total fixed costs will not be impacted by the special order
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