Hoover McKnight Sunglasses sell for about $$152$ per pair. Suppose the company incurs the following average costs per pair:

$($Click the icon to view the cost information.$)$

HooverMcKnighthas enough idle capacity to accept a one$-$time$-$only special order from NYC Glassesfor $21,000$ pairs of sunglasses at $$72$ per pair. HooverMcKnightwill not incur any variable marketing expenses for the order.

Read the requirements.

Requirement $1.$ How would accepting the order affect Hoover McKnight's operating income? In addition to the special order's effect on profits, what other $($longer$-$term qualitative$)$ factors should Hoover McKnight'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.$)$

Incremental Analysis of Special Sales Order Decision

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

Requirements

How would accepting the order affect Hoover McKnight's operating income? In addition to the special order's effect on profits, what other $($longer$-$term qualitative$)$ factors should Hoover McKnight's managers consider in deciding whether to accept the order?

Hoover McKnight's marketing manager, Jim Revo, argues against accepting the special order because the offer price of $$72$ is less than Hoover McKnight's $$84$ cost to make the sunglasses. Revo asks you, as one of Hoover McKnight's staff accountants, to explain whether his analysis is correct.