Hampshire Sunglasses sell for about $158 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 Nevada Shades for 17,000 pairs of sunglasses at $78 per 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 consider in deciding whether to accept the order? Prepare the analysis to determine the effect on operating income. (Enter decreases to profits with a parentheses or minus sign.) Expected increase in revenues Expected increase in expensessunglasses 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? A. will Hampshire's other customers find out about the lower sale price Hampshire offered to Nevada Shades? If so, will these other customers demand lower sale prices? How will Hampshire's competitors react? Will they retaliate by cutting their prices and starting a price war? Will lowering the sale price tarnish Hampshire's image as a high-quality brand? All of the above None of the above O B. OC. O D. O E. Requirement 2. Hampshire's marketing manager, Peter Rouse, argues against accepting the special order because the offer price of $78 is less than Hampshire's $88 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 total cost of making the sunglasses is to our decision. This is why comparing the $78 price Nevada Shades offered us with our $88 The additional revenues and the additional costs that we will incur to fill the special order are the Nevada Shades special order, we will incur only $ If we accept of additional cost per pair, which is than the $78 per pair that Nevada Shades offered. Therefore, we should the special order to the company's operating income Data Table Direct materials Direct labor Variable manufacturing overhead Variable selling expenses Fixed manufacturing overhead Total cost $2,200,000 Total fixed manufacturing overhead /88,000 Pairs of sunglasses 36 13 12 25 PrintDone Hampshire Sunglasses sell for about $158 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 Nevada Shades for 17,000 pairs of sunglasses at $78 per 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 consider in deciding whether to accept the order? Prepare the analysis to determine the effect on operating income. (Enter decreases to profits with a parentheses or minus sign.) Expected increase in revenues Expected increase in expensessunglasses 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? A. will Hampshire's other customers find out about the lower sale price Hampshire offered to Nevada Shades? If so, will these other customers demand lower sale prices? How will Hampshire's competitors react? Will they retaliate by cutting their prices and starting a price war? Will lowering the sale price tarnish Hampshire's image as a high-quality brand? All of the above None of the above O B. OC. O D. O E. Requirement 2. Hampshire's marketing manager, Peter Rouse, argues against accepting the special order because the offer price of $78 is less than Hampshire's $88 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 total cost of making the sunglasses is to our decision. This is why comparing the $78 price Nevada Shades offered us with our $88 The additional revenues and the additional costs that we will incur to fill the special order are the Nevada Shades special order, we will incur only $ If we accept of additional cost per pair, which is than the $78 per pair that Nevada Shades offered. Therefore, we should the special order to the company's operating income Data Table Direct materials Direct labor Variable manufacturing overhead Variable selling expenses Fixed manufacturing overhead Total cost $2,200,000 Total fixed manufacturing overhead /88,000 Pairs of sunglasses 36 13 12 25 PrintDone
