Newtown Sunglasses sell for about $156 per pair. Suppose that the company incurs the following average costs per pair: E (Click the icon to view the cost information.) Newtown has enough idle capacity to accept a one-time-only special order from Rolling Shades for 17,000 pairs of sunglasses at $71 per pair. Newtown will not incur any variable selling expenses for the order. Read the requirements. Requirement 1. How would accepting the order affect Newtown's operating income? In addition to the special order's effect on profits, what other (longer-term qualitative) factors should Newtown's managers consider in deciding whether to accept the order? Prepare the analysis to determine the effect on operating income. (Enter decreases to profits with a parentheses or minus sign.) Expected increase in revenues sunglasses x Expected increase in expenses sunglasses x Expected in operating income In addition to the special order's effect on profits, what other (longer-term qualitative) factors should Newtown's managers consider in deciding whether to accept the order? O A. How will Newtown's competitors react? Will they retaliate by cutting their prices and starting a price war? B. Will lowering the sale price tarnish Newtown's image as a high-quality brand? OC. Will Newtown's other customers find out about the lower sale price Newtown offered to Rolling Shades? If so, will these other customers demand lower sale prices? D. All of the above E. None of the above Requirement 2. Newtown's marketing manager, Peter Smith, argues against accepting the special order because the offer price of $71 is less than Newtown's $81 cost to make the sunglasses. Smith asks you, as one of Newtown's staff accountants, to explain whether his analysis is correct. What would you say? Costs that we will incur whether or not we fill the order are to our decision. This is why comparing When deciding whether to accept a special order, we should compare the the $71 price Rolling Shades offered us with our $81 total cost of making the sunglasses is If we accept than the $71 The additional revenues and the additional costs that we will incur to fill the special order are the Rolling Shades special order, we will incur only $ of additional cost per pair, which is per pair that Rolling Shades offered. Therefore, we should the special order to operating income. the company's -X Data Table Direct materials $ 39 Direct labor 11 Variable manufacturing overhead 9 Variable selling expenses 2 20 * Fixed manufacturing overhead $ 81 Total cost * $2,250,000 Total fixed manufacturing overhead / 112,500 Pairs of sunglasses Print Done Requirements 1. How would accepting the order affect Newtown's operating income? In addition to the special order's effect on profits, what other (longer-term qualitative) factors should Newtown's managers consider in deciding whether to accept the order? 2. Newtown's marketing manager, Peter Smith, argues against accepting the special order because the offer price of $71 is less than Newtown's $81 cost to make the sunglasses. Smith asks you, as one of Newtown's staff accountants, to explain whether his analysis is correct. What would you say? Print Done IMMT