Super Ban Sunglasses sell for about $154 per pair. Suppose that the company incurs the following average costs per pair: (Click the icon to view the cost information.) Super Ban has enough idle capacity to accept a one-time-only special order from Water Shades for 19,000 pairs of sunglasses at $80 per pair. Super Read the equireme accept the order? Prepare the analysis to determine the effect on operating income. (Enter decreases to profits with a parentheses or minus Ban will not incur any variable selling expenses for the order Data Table Expected increase in revenues Direct materials Direct labor Variable manufacturing overhead Variable selling expenses Fixed manufacturing overhead Total cost 41 10 Expected in operating income In addition to the special order's effect on profits, what other (longer-term qualitative) factors should Super - Ban's m 25 O A. How will Super- Ban's competitors react? Will they retaliate by cutting their prices and starting a price war? O B. Will Super Ban's other customers find out about the lower sale price Super Ban offered to Water Shades? If so, OC. Will lowering the sale price tanish Super Ban's image as a high-quality brand? O D. All of the above O E. None of the above 86 $2,250,000 Total fixed manufacturing overhead 90,000 Pairs of sunglasses Print Done Requirement 2. Super Ban's marketing manager, Peter McKnight, argues against accepting the special order because Super-Ban's staff accountants, to explain whether his analysis is correct. What would you say? When deciding whether to accept a special order, we should compare the Costs that we will incur whether or not we fill the order are to ou decision. This is why comparing the $80 price Water Shades offered us with our $86 total cost of making the sunglasses is Requirements If we accept The additional revenues and the additional costs that we will incur to fill the special order are the Water Shades special order, we will incur only S per pair that Water Shades offered. Therefore, we shouldthe special order to operating income. of additional cost per pair, which is than the $80 the company's 1. How would accepting the order affect Super-Ban's operating income? In addition to the special order's effect on profits, what other longer-term qualitative) factors should Super Ban's managers consider in deciding whether to accept the order? 2. Super- Ban's marketing manager, Peter McKnight, argues against accepting the special order because the offer price of $80 is less than Super-Ban's $86 cost to make the sunglasses. McKnight asks you, as one of Super-Ban's staff accountants, to explain whether his analysis is correct. What would you say? Choose from any list or enter any number in the input fields and then continue to the next question. Save for Later
