Hampshire Sunglasses sell for about $156 per pair. Suppose that the company incurs the following average costs per pair (Click the icon to view the cost information.) Hampshire has enough idle capacity to accept a one-time-only special order from Colorado Shades for 18,000 pairs of sunglasses at $69 pair. Hampshire will not incur any variable selling expenses for the order. Read the requirements. Requirement 1. How would accepting the order affect Hampshire's operating income? In addition to the special order's effect on profits, what other (longer-term qualitative) factors should Hampshire's managers od sider in deciding whether to accept the order? Question Viewer Prepare the analysis to determine the effect on operating income. (Enter dec h a parentheses or minus sign.) Expected increase in revenues sunglasses Expected increase in expenses C sunglasses x L Expected in operating income In addition to the special order's effect on profits, what other (longer-term qualitative) factors should Hampshire's managers consider in deciding whether to accept the order? O A. Will lowering the sale price tarnish Hampshire's image as a high-quality brand? O B. How will Hampshire's competitors react? Will they retaliate by cutting their prices and starting a price war? OC. Will Hampshire's other customers find out about the lower sale price Hampshire offered to Colorado Shades? If so, will these other customers demand lower sale prices? OD. All of the above O E. None of the above Requirement 2. Hampshire's marketing manager, Peter Rouse, argues against accepting the special order because the offer price of $60 is less than Hampshire's $77 cost to make the sunglasses. Rouse asks you, as one of Hampshire'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 Choose from any list or enter any number in the input fields and then continue to the next question O Type here to search Hampshire Sunglasses sell for about $156 per pair. Suppose that the company incurs the following average costs per pair E: (Click the icon to view the cost information.) Hampshire has enough ide capacity to accept a one-time-only special order from Colorado Shades for 18,000 pairs of sunglasses at $69 per pair. Hampshire will not incur any variable selling expenses for the order. Read the requirements In addition to the special order's effect on profits, what other (longer-term qualitative) factors should Hampshire's managers consider in deciding whether to accept the order? O A. Wil lowering the sale price tarnish Hampshire's image as a high-quality brand? O B. How will Hampshire's competitors react? Will they retaliate by cutting their prices and starting a price war? OC. Will Hampshire's other customers find out about the lower sale price Hampshire offered to Colorado Shades? If so, will these other customers demand lower sale prices? OD. All of the above OE. None of the above Requirement 2. Hampshire's marketing manager, Peter Rouse, argues against accepting the special order because the offer price of $69 is less than Hampshire's $77 cost to make the sunglasses. Rouse asks you, as one of Hampshire'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 $69 price Colorado Shades offered us with our $77 total cost of making the sunglasses is The additional revenues and the additional costs that we will incur to fill the special order are the Colorado Shades special order, we will incur only of additional cost per pair, which is per pair that Colorado Shades offered. Therefore, we should the special order to operating income if we accept than the the company's $69 Choose from any list or enter any number in the input fields and then continue to the next question Type here to search o so, will thes apshire's rs dema above of the aboy i Data Table 2. Hamps ampshire's s correct. he offer price of to explain wheth mg whether Direct materials Direct labor Variable manufacturing overhead Variable selling expenses Fixed manufacturing overhead for not we fill the tal cost of making sis Total cost * $2,000,000 Total fixed manufacturing overhead / 100,000 Pairs of sunglasses ional revenues rado Shades so that Colorado S ng income. Print Done cept than the $69 pany's
