Stone River Furniture Company manufactures wood furniture for home offices and pany manufactures wood furniture for home offices and living rooms. A ment for three of its products lines is shown as follows: 2.000 Unit Double Denk Entertainment Stong Single Dunk Per Unit $400 200 Per Und Per Unit Sales revenue Variable costs Contribution margin Fred costs Operating profit $800,000 400.000 $400,000 250,000 $150.000 $600 400 $200 1500 Unit Total $300,000 200,000 $100,000 125,000 5 (25.000) $900 400 $500 food Unit Total 900,000 400,000 $500,000 125,000 $375,000 $200 Perform an incremental analysis for each of the following independent scenarios. 1. The local high school has approached Stone River with an offer to buy 500 single desks at a special order price of $300. In addition to the variable costs of filling the order, it would cost $12,500 to modify the desks to fit the school's classrooms. a. If the company has the capacity to fill the special order without affecting normal sales, how much incremental profit (loss) would be made on the special order? b. If the company has the idle capacity to produce 200 desks and would be forced to cancel the sale of 300 desks sold through normal channels, how much incremental profit (loss) would be made on the special order? 2. The company is considering outsourcing production of the entertainment unit to another manufacturer who has agreed to supply it for $550 per unit. In addition to the variable cost savings, the company could eliminate $200,000 in fixed costs by outsourcing. What is the incremental profit (loss) of outsourcing? The company is considering dropping the double desk line because it is unprofitable. Only $50,000 of the fixed costs are directly attributable to the double desk product and could be eliminated if the product is dropped. Dropping the double desk line is expected to increase sales of the single desk model by 10%. What is the incremental profit (loss) of dropping the double desk line? The company is considering adding lighting and electrical outlets to the entertainment unit. Doing so will increase variable costs by $50 per unit and fixed costs by $25,000. Managers believe they can sell the enhanced model for $1,000, but would only be able to sell 800 units of the higher-priced model. What is the incremental profit (loss) of the enhanced model? 5. The company has a limited supply of the birch wood that is used in all three of its products. The single desk requires 50 feet of birch wood; the double desk requires 80 feet; and the entertainment unit requires 100 feet. If the company has 40,000 feet of birch wood and an unlimited demand for all three products, how many units of each product should they produce and how much contribution margin will the company earn