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- Requirements 1. Identify each cost in the income statement as either relevant or irrelevant to Deep Blue's decision. 2. Prepare a differential analysis to

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- Requirements 1. Identify each cost in the income statement as either relevant or irrelevant to Deep Blue's decision. 2. Prepare a differential analysis to determine whether Deep Blue should accept this special sales order. 3. Identify long-term factors Deep Blue should consider in deciding whether to accept the special sales order. Deep Blue Income Statement For the Month Ended March 31, 2024 Sales in Units 30,000 Net Sales Revenue $ 510,000 Variable Costs: Manufacturing 90,000 Selling and Administrative 107,000 Total Variable Costs 197,000 Contribution Margin 313,000 Fixed Costs: Manufacturing 123,000 89,000 Selling and Administrative Total Fixed Costs 212,000 $ 101,000 Operating Income Deep Blue manufactures flotation vests in Charleston, South Carolina. Deep Blue's contribution margin income statement for the month ended March 31, 2024, contains the following data: (Click the icon to view the cost information) Read the feguirement Suppose Optimum wishes to buy 3,800 vests from Deep Blue. Deep Blue will not incur any variable selling and administrative expenses on the special order. The Deep Blue plant has enough unused capacity to manufacture the additional vests. Optimum has offered $6 per vest, which is below the normal sales price of $17 Requirement 1. Identify each cost in the income statement as either relevant or irrelevant to Deep Blue's decision. Variable Manufacturing Costs Variable Selling and Administrative Costs Fixed Manufacturing Costs Fixed Selling and Administrative Costs Requirement 2. Prepare a differential analysis to determine whether Deep Blue should accept this special sales order. (Enter decreases to revenue or increases to costs with a parentheses or minus sign.) in operating income Decision: Requirement 3. Identify long-term factors Deep Blue should consider in deciding whether to accept the special sales order. In addition to determining the special order's effect on operating profits, Deep Blue's managers also should consider the following: A. Will Deep Blue's other customers find out about the lower sale price Deep Blue accepted from Optimum? If so, will these other customers demand lower sale prices? B. Will the special order customer come back again and again, asking for the same reduced price? C. How will Deep Blue's competitors react? Will they retaliate by cutting their prices and starting a price war? D. All of the above E. None of the above

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