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Summer Fun manufactures flotation vests in Tampa, FL. Summer Funs contribution margin income statement for the month ended December 31, 2016, contains the following data.
Summer Fun manufactures flotation vests in Tampa, FL. Summer Funs contribution margin income statement for the month ended December 31, 2016, contains the following data.
Summer Fun | |
Income Statement | |
For the month ended December 31, 2021 | |
Sales in units | 3,100 |
Sales Revenues | $ 465,000 |
Variable Costs: | |
Manufacturing | 93,000 |
Selling and Administration | 111,000 |
Total Variable Costs | 204,000 |
Contribution Margin | 261,000 |
Fixed Costs: | |
Manufacturing | 121,000 |
Selling and Administration | 86,000 |
Total Fixed Costs | 207,000 |
Operating Income | $ 54,000 |
Suppose Overtown wishes to buy 4,700 vests from Summer Fun. Summer Fun will not incur any variable selling and administrative expenses on the special order. The Summer Fun plant has enough unused capacity to manufacture the additional vests. Overtown has offered to pay $10 per vest, which is below the normal sale price of $15.
Requirements
- Determine whether Summer Fun should accept this special order. Show your calcula
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