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(b) Discuss additonal factors that Mike and Diane should consider if Current Designs is currently operating at full capacity Response: Situation 1 (a) Prepare an incremental analysis to determine whether Current Designs should accept this special order to produce the coolers Net Income Reject Order Accept Order Increase (Decrease) Revenues Costs: Direct materials Direct labor Variable overhead Fixed overhead Cost to modify existing mold Total costs Net income Based solely on financial considerations, Current Designs should (indicate by placing an "X" in the appropriate cell below) Reject Accept Response: 01 12 CURRENT DESIGNS Current Designs faces a number of important decisions that require incremental analysis. Consider each of the following situations independently. Situation 1 4 Recently, Mike Cichanowski, owner and CEO of Current Designs, received a phone call from the president 5 of a brewing company. He was calling to inquire about the possibility of Current Designs producing floating coolers" for a promotion his company was planning. These coolers resemble a kayak but are about one-third 7 the size. They are used to float food and beverages while paddling down the river on a weekend leisure trip. 18 The company would be interested in purchasing 150 coolers for the upcoming summer. It is willing to pay $375 19 per cooler. The brewing company would pick up the coolers upon completion of the order 20 Mike met with Diane Buswell, controller, to identify how much it would cost Current Designs to produce 21 the coolers. After careful analysis, the following costs were identified. 23 24 25 Direct materials Direct labor $120/unit $90/unit Variable overheadS30/unit Fixed overhead $1,500 26 Current Designs would be able to modify an existing mold to produce the coolers. The cost of these 27 modifications would be approximately $3,000. 28 29 Instructions 30 (a) Prepare an incremental analysis to determine whether Current Designs should accept this special order to 32 (b) Discuss additonal factors that Mike and Dlane shoutd consider if Curnrent besiens s currendy operatineg at 31 produce the coolers full capacity