Nautical manufactures flotation vests in Orlando, Florida. Nautical's contribution margin income statement for the most recent month contains the following data:

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

Suppose Water Fun Cruiselines wants to buy $5,400$ vests from Nautical. Acceptance of the order will not require any variable selling and administrative expenses. The special order will not affect

fixed expenses. The Nautical plant has enough unused capacity to manufacture the additional vests. Water Fun Cruiselines has offered $$10$ per vest, which is below the normal sale price of $$16.$

Read the requirements.

Requirement $1.$ Prepare an incremental analysis to determine whether Nautical should accept this special sales order. $($Enter a $"0"$ for any zero balances. Use parentheses or a minus sign to

indicate a negative contribution margin and$/$or a decrease in operating income from the special order.$)$

Less: Additional fixed expenses associated with the order

Increase $($decrease$)$ in operating income from the special order A

B

$1$

Nautical

$2$

Contribution Margin Income Statement $($Variable Costing$)$

$3$

For Sales Volume of $28,000$ Units

$4$

Total

$5$

Sales revenue

$$448,000$

$6$

Less variable expenses:

$7$

Variable manufacturing costs $($DM$,$ DL$,$ Variable MOH$)$

$196,000$

$8$

Variable operating expenses $($selling and administrative$)$

$107,000$

$9$

Contribution margin

$$145,000$

$10$

Less fixed expenses:

$11$

Fixed manufacturing overhead

$$127,000$

$12$

Fixed operating expenses $($selling and administrative$)$

$85,000$

$13$

Operating income $($loss$)$

$$(67,000)$