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Maritime manufactures flotation vests in San Diego, California. Maritime's contribution margin income statement for the most recent month contains the following data: 5 Click the
Maritime manufactures flotation vests in San Diego, California. Maritime's contribution margin income statement for the most recent month contains the following data: 5 Click the icon to view the cost information.) Suppose Boats-n-More Cruiselines wants to buy 4,800 vests from Maritime. Acceptance of the order will not increase Maritime's variable marketing and administrative expenses or any of its fixed expenses. The Maritime plant has enough unused capacity to manufacture the additional vests. Boats-n-More Cruiselines has offered $6 per vest, which is below the normal sale price of $15. Read the requirements Data Table Requirement 1. Prepare an incremental analysis to determine whether Maritime should accept this special sales order. (Enter a "o margin and/or a decrease in operating income from the special order.) X Total Order Per Unit (4,800 units) Incremental Analysis of Special Sales Order Decision Revenue from special order Less variable expense associated with the order: Variable manufacturing costs Maritime Contribution Margin Income Statement (Variable Costing) For Sales Volume of 32,000 Units Total $ 480,000 Contribution margin Less: Additional fixed expenses associated with the order 160,000 104.000 Increase (decrease) in operating income from the special order Sales revenue Less variable expenses: Variable manufacturing costs (DM, DL, Variable MOH) Variable operating expenses (selling and administrative) Contribution margin Less fixed expenses: Fixed manufacturing overhead Fixed operating expenses (selling and administrative) $ 216,000 Enter any number in the edit fields and then continue to the next question. $ 122,000 88,000 6.000 Decision: Requirement 2. Identify long-term factors Maritime should consider in deciding whether to accept the special sales order. In addition to determining the special order's effect on operating profits, Maritime's managers also should consider the following: O A. Will Maritime's other customers find out about the lower sale price Maritime accepted from Boats - n-More? If so, will these other customers demand lower sale prices? O B. Will lowering the sale price tarnish Maritime's image as a quality brand? O C. How will Maritime's competitors react? Will they retaliate by cutting their prices and starting a price war? OD. All of the above. O E. None of the above
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