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Nautical manufactures flotation vests in Philadelphia, Pennsylvania. Nautical's contribution margin income statement for the most recent month contains the following data: (Click the loon to
Nautical manufactures flotation vests in Philadelphia, Pennsylvania. Nautical's contribution margin income statement for the most recent month contains the following data: (Click the loon to view the cost Information.) Suppose Boat Safely wants to buy 5,500 vests from Nautical. Acceptance of the order will not increase Nauticals variable marketing and administrative expenses or any of its fixed expenses. The Nautical plant has enough unused capacity to manufacture the additional vests. Boat Safely has offered $9 per vest, which is below the normal sale price of $15. Requirements 1. Prepare an incremental analysis to determine whether Nautical should accept this special sales order. i More Info 2. Identify long-term factors Nautical should consider in deciding whether to accept the special sales order. Nautical Incremental Analysis of Special Sales Order Sales in units .......... 31,000 Expected increase in revenue Sales revenue .... .......... $ 465,000 Expected increase in expenses Variable expenses: Expected increase (decrease) in operating income Manufacturing .................. $ 93,000 ministrative Marketing and administrative ... 108,000 ... Decision: Total variable expenses ............. 201,000 Requirement 2. In addition to determining the special order's effect on operating profits, Nautical's managers also should consider the following: 264,000 Contribution margin O A. Will lowering the sale price tarnish Nautical's Image as a quality brand? Fixed expenses: OB. Will Nautical's other customers find out about the lower sale price Nautical accepted from Boat Safely? If so, will these other customers demand lower se Manufacturing 121,000 Oc. How will Nautical's competitors react? Will they retaliate by cutting their prices and starting a price war? Marketing and administrative ........ 91,000 OD. All of the above. 212,000 Total fixed expenses O E. None of the above. 52,000 Operating income loss).................. ............ Enter any number in the edit fields and then continue to the next question. Print Done
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