Foster

Root

Sunglasses sell for about

$135

per pair. Suppose the company incurs the following average costs per pair:

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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

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.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.

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parts remaining

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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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