Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

this is all information i have Rally Sunglasses sell for about $190 per pair. Suppose the company incurs the following average costs per pair E

image text in transcribed

image text in transcribed

image text in transcribed

image text in transcribed

image text in transcribed

image text in transcribed

this is all information i have

Rally Sunglasses sell for about $190 per pair. Suppose the company incurs the following average costs per pair E (Click the icon to view the cost information.) Rally has enough idle capacity to accept a one-time-only special order from Vision Lenses for 18,000 pairs of sunglasses at $79 per pair. Rally will not incur any variable marketing expenses for the order. Requirements Requirement 1. How would accepting the order affect Rally's operating income? In addition to the special order's effect on profits, what other (longer-term qualitative) factors should Rally's managers consider in deciding whether to accept the order? Prepare the analysis to determine the effect on operating income. (Enter a zero, "0", in an input box if there is no expected change in the expense. Use parentheses or a minus sign for an expected decrease in operating income.) Rally Incremental Analysis of Special Sales Order Expected increase in revenues Data Table - X Direct materials $ 41 Direct labour 16 9 Variable manufacturing overhead Variable marketing expenses. 2. 20. 88 Fixed manufacturing overhead. S Total cost * $2,600,000 total fixed manufacturing overhead / 130,000 pairs of sunglasses Print Done the following average Requirement 1. How would accepting the order affect Rally's operating income? In addition to the special order's effect on profits, what other (longer-term qualitative) factors should Rally's managers consider in deciding whether to accept the order? Prepare the analysis to determine the effect on operating income. (Enter a zero, "O", in an input box if there is no expected change in the expense. Use parentheses or a minus sign for an expected decrease in operating income.) Rally Incremental Analysis of Special Sales Order Expected increase in revenues Expected increase in expenses Variable manufacturing cost Fixed manufacturing costs Total expected increase in expenses relage Total expected increase in expenses Expected increase (decrease) in operating income In addition to the special order's effect on profits, what other (longer-term qualitative) factors should Rally's managers consider in deciding whether to accept the order? In addition to determining the special order's effect on operating profits, Rally's managers also should consider the following: (Select all that apply.) A. When should the equipment used to produce sunglasses be refurbished and at what cost? W B. Will lowering the sale price tarnish Rally's image as a high-quality brand? C. How will Rally's competitors react? Will they retaliate by cutting their prices and starting a price war? D. Will Rally's other customers find out about the lower sale price Rally offered to Vision Lenses? If so, will these other customers demand lower sale prices? Requirement 2. Rally's marketing manager, Jim Revo, argues against accepting the special order hannuin the offer neinn af C70 in Innn than na COO onion malin tho.cuinnnnnnnnnnnnnn . owing average Requirement 2. Rally's marketing manager, Jim Revo, argues against accepting the special order because the offer price of $79 is less than Rally's $88 cost to make the sunglasses. Revo asks you, as one of Rally's staff accountants, to write a memo explaining whether his analysis is correct. Date: To: Mr. Jim Revo, Marketing Manager From: Staff Accountant Subject Vision Lenses special order When deciding whether to accept a special order, we should compare the extra revenues we will receive against the V. Costs that we will incur whether or not we fill the order are V to our decision. This is why comparing the $79 price Vision Lenses offered us with our $88 total cost of making and selling the sunglasses is Rally Sunglasses sell for about $190 per pair. Suppose the company incurs the following average When deciding whether to accept a special order, we should compare the extra revenues we will receive against the V. Costs that we will incur whether or not we fill the order are V to our decision. This is why comparing the $79 price Vision Lenses offered us with our $88 total cost of making and selling the sunglasses is Specifically, we have enough capacity to produce the 20,000 extra pairs of sunglasses for Vision Lenses' special order without increasing our Our will V V whether or not we accept the order, so these costs are Also, as you know, we will not incur any on the special order. These costs will be the same whether or not we make the additional 20,000 pairs of sunglasses for Vision Lenses, so these costs are The extra V to fill the special order are we accept Vision Lenses' special order, we will incur $ extra cost per pair of sunglasses. If

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

College Accounting, Chapters 1-9

Authors: James A. Heintz

20th Edition

0538745223, 9780538745222

More Books

Students also viewed these Accounting questions