Question
Foster Root Sunglasses sell for about $135 per pair. Suppose the company incurs the following average costs per pair: LOADING... (Click the icon to view
|
Foster
Root
Sunglasses sell for about
$135
per pair. Suppose the company incurs the following average costs per pair:
LOADING...
(Click the icon to view the cost information.)
Foster
Root
has enough idle capacity to accept a one-time-only special order from
Colorado Glasses
for
21,000
pairs of sunglasses at
$76
per pair.
Foster
Root
will not incur any variable marketing expenses for the order.Read the requirements
LOADING...
.Requirement 1. How would accepting the order affect
Foster
Root's
operating income? In addition to the special order's effect on profits, what other (longer-term qualitative) factors should
Foster
Root's
managers consider in deciding whether to accept the order?
Prepare an incremental analysis to determine the special order's effect on operating income. (Enter a "0" for any zero balances. Use parentheses or a minus sign to indicate a decrease in operating income from the special order.)
| Total Order | |
---|---|---|
Incremental Analysis of Special Sales Order Decision | Per Unit | (21,000 units) |
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 |
|
|
Enter any number in the edit fields and then click Check Answer.
| Clear All | Check Answer
|
Data Table
Direct materials. . . . . . . . . . . . . . . . . . . . | $43 |
---|---|
Direct labor. . . . . . . . . . . . . . . . . . . . . . . | 12 |
Variable manufacturing overhead. . . . . . . | 9 |
Variable marketing expenses. . . . . . . . . . | 2 |
Fixed manufacturing overhead. . . . . . . . . | 25* |
Total cost. . . . . . . . . . . . . . . . . . . . . . . . . | $91 |
* $2,000,000 total fixed manufacturing overhead 80,000 pairs of sunglasses |
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