Hoover Route Sunglasses sell for about $153 per pair Suppose the company inours the following average costs per pair Click the icon to view the cost information) Hoover Rouse has enough idle capacity to accept a one-time-only special order from La Glines for 20,000 pairs of sunglasses at $73 per pair Hocver Rouse with incur any variable marketing expenses for the order. Read the requirements Requirement 1. How would accepting the order affect Hoover Rouse's operating income? In addition to the special order's effect on profits, what other (longer to qualitative) factors should Hoover Rouse'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 "o" for any zero bintances. Use parentheses or a minus signis indicate a decrease in operating income from the special order) Total Order Incremental Analysis of Special Sales Order Decision Per Unit (20,000 units) Revenue from special order Less variable expense associated with the order Variable manufacturing costs Contribution margin Lass: Additional fixed expenses associated with the order Increase (decrease) in operating income from the special order In addition to determining the special order's effect on operating profits, Route's managers alto should consider the following: O A Will lowering the sale price tarih Hoover Rouse's image as a high quality trand? 3. Wil Hoover Rouse's other customers ind out about the lower sale price Hoover Rouse offered to LA Glasse? if so, will these other customers demand tower prices? C. How will Hoover Rouse's competitors react? Will they retaliate by cutting the prices and starting a price war? OD. All of the above OE None of the above Requirement 2. Hoover Route's marketing manager, Jim Revo, argues against coepiting the special order because the offer price of 573 is less than Hoover Route's 586 cost to make the sunglasses Revo asks you, as one of Hoover Rouse's staff accountants, to explain whether his analysis is correct When deciding whethue to accept a special order, we should compare the extra revenues we will receive against the V Cool that we will incur whether or not we fill the order are to our decision. This is why comparing the 573 prin LA Glasses offered us with our 585 total cost of maku and sting the sunglasses in Data Table $ 40 Direct materials h 12 Direct labor llowing ct N RO So, will og 11 Variable manufacturing overhead Variable marketing expenses 20* Fixed manufacturing overhead $ 85 Total cost * $2,000,000 total fixed manufacturing overhead - 100,000 pairs of sunglasses ct Print Done ag e offer analysis
