This case study may be completed individually or with a partner. The assignment must be handwritten and a hard copy turned in to the front desk of the School of Accountancy (McClelland Hall Room 301) no later than 5:00 PM on Wednesday, December 4, 2019. The assignment is worth 10 points. There will be a 20%- point deduction for every business day or partial business day that the assignment is turned in late. Child's Play Company Child's Play Company makes a plastic rattle for toddlers. The rattle is generally marketed through exclusive retailers located in upscale shopping malls. Based on sales from January through September 2018, the company expects that 2018 sales will amount to 300,000 units. In late 2018, Diana Carlos, the president of the company, was considering an alternative marketing plan for 2019 that was presented to her by Bill Jackson, the marketing manager. Bill's alternative marketing plan is presented below: 2019 Marketing Plan: "At the present time, we sell the product to retailers for $8.00 per rattle. Retailers generally charge their customers between $9 and $9.50. If we cut our selling price to retailers to $7.50, I expect that the product will do much better. The retailers' increased markup will give them the incentive to display our product more prominently and to promote it more vigorously to customers. We should support this strategy by supplying more promotional materials to retailers, which I expect would be an increase of $6,000 in Advertising and Promotion costs. Based on the price cut and the increase in advertising and promotion, expect that we will be able to boost our sales volume by 25 percent to 375,000 units in 2019." Diana received cost data from the company's CFO, Don Beetle. Don expects that the 2018 cost data below are also reliable estimates for 2019 for a production volume up to 500,000 units. 2018 Cost Data Manufacturing Costs for rattles (based on production volume of 300,000 units): Direct Materials Direct Labor Packaging Variable Manufacturing Overhead Fixed Manufacturing Overhead $0.80 per unit $0.50 per unit $0.70 per unit $1.20 per unit $540,000 Selling and Administrative Costs for rattles (based on sales volume of 300,000 units): Sales Commissions $0.80 per unit Shipping Costs $0.50 per unit Advertising and Promotion (fixed) $180,000 Selling and Admin Expenses (fixed) $250,000 Part 2 Child's Play has been approached by the government, which is seeking to buy 150,000 rattles for its day care centers in 2019. The proposed government contract states that the government would pay Child's Play $3.75 per rattle. If Child's Play decides to accept this special order, they would avoid packaging costs for this contract as well as all variable selling and administrative costs. Refer to page 1 for the company's estimated cost data. The company has excess capacity to make these additional rattles. 1. Prepare an analysis below to determine the incremental net income or net loss that Child's Play would recognize if they accept this special order. Clearly identify the incremental net income or net loss that you determine from your analysis. 2. Should Child's Play accept or reject the government contract? This case study may be completed individually or with a partner. The assignment must be handwritten and a hard copy turned in to the front desk of the School of Accountancy (McClelland Hall Room 301) no later than 5:00 PM on Wednesday, December 4, 2019. The assignment is worth 10 points. There will be a 20%- point deduction for every business day or partial business day that the assignment is turned in late. Child's Play Company Child's Play Company makes a plastic rattle for toddlers. The rattle is generally marketed through exclusive retailers located in upscale shopping malls. Based on sales from January through September 2018, the company expects that 2018 sales will amount to 300,000 units. In late 2018, Diana Carlos, the president of the company, was considering an alternative marketing plan for 2019 that was presented to her by Bill Jackson, the marketing manager. Bill's alternative marketing plan is presented below: 2019 Marketing Plan: "At the present time, we sell the product to retailers for $8.00 per rattle. Retailers generally charge their customers between $9 and $9.50. If we cut our selling price to retailers to $7.50, I expect that the product will do much better. The retailers' increased markup will give them the incentive to display our product more prominently and to promote it more vigorously to customers. We should support this strategy by supplying more promotional materials to retailers, which I expect would be an increase of $6,000 in Advertising and Promotion costs. Based on the price cut and the increase in advertising and promotion, expect that we will be able to boost our sales volume by 25 percent to 375,000 units in 2019." Diana received cost data from the company's CFO, Don Beetle. Don expects that the 2018 cost data below are also reliable estimates for 2019 for a production volume up to 500,000 units. 2018 Cost Data Manufacturing Costs for rattles (based on production volume of 300,000 units): Direct Materials Direct Labor Packaging Variable Manufacturing Overhead Fixed Manufacturing Overhead $0.80 per unit $0.50 per unit $0.70 per unit $1.20 per unit $540,000 Selling and Administrative Costs for rattles (based on sales volume of 300,000 units): Sales Commissions $0.80 per unit Shipping Costs $0.50 per unit Advertising and Promotion (fixed) $180,000 Selling and Admin Expenses (fixed) $250,000 Part 2 Child's Play has been approached by the government, which is seeking to buy 150,000 rattles for its day care centers in 2019. The proposed government contract states that the government would pay Child's Play $3.75 per rattle. If Child's Play decides to accept this special order, they would avoid packaging costs for this contract as well as all variable selling and administrative costs. Refer to page 1 for the company's estimated cost data. The company has excess capacity to make these additional rattles. 1. Prepare an analysis below to determine the incremental net income or net loss that Child's Play would recognize if they accept this special order. Clearly identify the incremental net income or net loss that you determine from your analysis. 2. Should Child's Play accept or reject the government contract