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Sale Saling manufactures flotation vests in San Francisco, California, Sale Saling's contribution margin ncome statement for the most recent month contains the following data: (Click
Sale Saling manufactures flotation vests in San Francisco, California, Sale Saling's contribution margin ncome statement for the most recent month contains the following data: (Click the icon to view the cost Information.) Suppose Boat Safety Cruisines wants to buy 4,900 vests from Safe Saling Acceptance of the order will not require any variable selling and administrative expenses. The special order will not affect fred expenses. The Safe Sailing plant has enough unused capacity to manufacture the additional vests Boat Safety Cruisines has offered 58 per vest, which is below the normal sale price of $15. Read the requirements Requirement 1. Prepare an incremental analysis to determine whether Safe Saling should scoopt this special sales order. (Entora "Ofor any zero bas. Use parentheses or a minus sign to indicate a negative contribution margin and/or a decrease in operating income from the special order) Total Order Incremental Analysis of Special Sales Order Decision Per Unit (4.000 units) Revenue from special order Less variable expense associated with the order: Variable manufacturing costs Contribution margin Less: Additional fixed expenses associated with the order Increase (decrease in operating income from the special order Decision Requirement 2. Identify long-term factors Safe Sailing should consider in deciding whether to accept the special sales order. In addition to determining the special order's effect on operating profits, Safe Sailing's managers also should consider the following: O A. How will Safe Sailing's competitors react? Will they retaliate by cutting their prices and starting a price war? OB. Will lowering the sale price tarnish Safe Sailing's image as a quality brand? OC. Wil Safe Sailing's other customers find out about the lower sale price Sale Sailing accepted from Boat Safety? If so, will these other customers demand lower sale prices? OD. All of the above. O E. None of the above. i Data Table Safe Sailing Contribution Margin Income Statement (Variable Costing) For Sales Volume of 33,000 Units Total Sales revenue $ 495,000 Less variable expenses: Variable manufacturing costs (DM, DL, Variable MOH) Variable operating expenses (selling and administrative) Contribution margin 99,000 103,000 $ 293,000 Less fixed expenses: Fixed manufacturing overhead 127,000 91,000 Fixed operating expenses (selling and administrative) 75,000 Operating income (loss)
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