Vera Preston Sunglasses sel for about $135 per pair. Suppose the company incurs the following average costs per pair Click the icon to view the cost information) Vera Preston has enough idle capacity to accept a one-time-only special order from Rolling Glasses for 23,000 pairs of surges a $70 per pair. Vera Preston will not in any variable marketing expenses for the order Read the requirements Requirement 1. How would accepting the order otteet Vera Preston's operating income in addition to the special order's effect on profits, what other longer tor qualitative) factors should Vera Prostor's manager corider in deciding whether to accept the order? Prepare an incremental analysis to determine the special order's effect on operating income. (Enter a for any zero belence. Une parentheses or a minus sign to indicate a decrease in operating noone to the special order) Total Order Incremental Analysis of Special Sales Order Decision Per Unit (23,000 units) Revenue from special order Less variable expense socialed with the order Variable manufacturing costs Contribution margin Los: Additional food expenses associated with the order Increase (decrease in operating income from the special order x s effect on o Data Table ate a decrease in operating inc on $ 42 14 3 Direct materials Direct labor Variable manufacturing overhead 10 Variable marketing expenses Fixed manufacturing overhead 85 Total cost * $2,000,000 total fixed manufacturing overhead / 125,000 pairs of sunglasses 16 der Print Done der's of rease in operating ir * Requirements - X ecision 1. How would accepting the order affect Vera Preston's operating income? In addition to the special order's effect on profits, what other (longer-term qualitative) factors should Vera Preston's managers consider in deciding whether to accept the order? 2. Vera Preston's marketing manager, Jim Revo, argues against accepting the special order because the offer price of $70 is less than Vera Preston's $85 cost to make the sunglasses Revo asks you, as one of Vera Preston's staff accountants, to explain whether his analysis is correct or al order Print Done E8-23A (similar to) Question Help Top managers of New York Flooring are alarmed by their operating losses. They we considering dropping the laminate fooring product line Company accountants have prepared the following analysis to help make this decision Click the icon to view the analysis.) Total fixed costs will not change the company los soling laminate fooring, Read the requirements Requirement 1. Prepare an incremental analysis to show whether New York Flooring should discontinue the Laminate forng product ine. Wil discontinuing laminate flooring add $28,000 to operating income? plan. ( a *o* nan pul box if there is no expected change as a result of discontinuing the laminate flooring product in this sonario) Incremental Analysis for Discontinuation Decision Total Contribution margin oli laminate fooring product line is dropped Less: Fixed cost savings laminate flooring productie is dropped Operating income ir laminate fooring is dropped 6 of 9 (3 complete) ses. They are considering dropping the laminate flooring product line. Company accountants have prepared the follo flooring Data Table Hd $28,000 New York Flooring Product Line Contribution Margin Income Statement For the Year Product lines d rop Sales revenue Wood flooring Laminate flooring Company Total S 304,000 $ 130,000 $ 434,000 154,000 88,000 242,000 $ 150,000 $ 42,000 $ 192,000 Less: Variable expenses Contribution margin Less fixed expenses: Manufacturing Marketing and administrative 71,000 54,000 57,000 13,000 128,000 67,000 (3,000) $ 25,000 $ (28,000) $ Operating income (loss) Print Done n Deci 0 Requirements ne is di ne is a floorin 1. Prepare an incremental analysis to show whether New York Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $28,000 to operating income? Explain. 2. Assume that the company can avoid $31,000 of fixed expenses by discontinuing the laminate flooring product line (these costs are direct fixed costs of the laminate flooring product line). Prepare an incremental analysis to show whether the company should stop selling laminate flooring. 3. Now, assume that all of the fixed costs assigned to laminate flooring are direct fixed costs and can be avoided if the company stops selling laminate flooring. However, marketing has concluded that wood flooring sales would be adversely affected by discontinuing the laminate flooring line (retailers want to buy both from the same supplier). Wood flooring production and sales would decline 10%. What should the company do? Print Done Contain- it produces plastic storage bins for household storage needs. The company makes two sizes of bins Large (5 galon) and Regular (35gation). Demand for the product is so high that the company can sell as many of each stresit can produce. The same machinery is used to produce both sizes. The machinery is available for only 2.800 hours per period. The company can produce 12 Large bins every hour compared to 17 Regular bins in the same amount of time. Feed expenses amount to $95.000 per period. Sales prices and variable costs are as follows: Click the icon to view the costs) 1. Which product should Contain - It emphasize? Why? 2. Tomadimire profit, how many of each wize bin should the company produce? 3. Given this product is what will the company's operating income be? 1. Which product should Containers? Why? Come the product manalysis to determine which product on it thought Contain Produit M Analysis Regular Large Sales price per Lowcowper un Contribution margin perund Units per machine Contribution mari per machine hour a Data Table Regular Large Sales price per unit $ 8.20 $ 10.70 Variable cost per unit $ 3.20 $ 4.40 Print Done Suppose a Roasted Olive restaurant is considering whether to (1) bake bread for its restaurant in house or (2) buy the broad from a local bakery The che estimates that variable costs of making each bar nude $0.50 al ingredients, 60200 vorable overhead (electricity to run the oven)and 80 75 of direct labor for reading and forming the electing fred overhead deprecation on the kitchen equipment and bulding) based on rectorio de fundova perlo. None of the fixed costs are soldate. The local bakery would charge Roasted Olive 51.7 per la 1. What is the absorption cost of making the bread in house? What is the variable cost per 2. Should Roasted Olvebake the bread in-house or buy from the local bakery? Why? 3. In addition to the financial analysis what else should Roasted Olive consider when making this decision? 1. What is the absorption cost of making the bread in-house? What is the variable cost per la Roasted Olive Outsourcing Decision (Absorption Costing Variable couper lo Full (absorption cost periood processed, each bach of cocoa beans would result in the following sales revenus Chocolte processes cocoa beans into cocoa powder a processing cost of 80.500 per baith Chocolle can sell the cocoa powder as is, or it can process the cocoa powder further into chocolate por bound red chocolates. Once (Click the icon to view the sales revenue) The cost of transforming the cocoa powder into chocolate synup would be $73,000. Likewise, the company would incur $184000 to transform the cocoa powder into boxed assorted chocolates. The company president has decided to make boxed assorted chocolates owing to its high sales value and to the fact that the $9,500 cost of processing cocoa beans als up most of the cocoa powder profis. Has the president made the right or wrong decision? Explain your answer Complete the following incremental analysis to compare selling the cocoa powder as is with processing it futhet. (Entora e for any pero sourt) Selas Sellas Sell as Boxed Cocoa Chocolate Assorted Powder Syrup Chocolates LOSS Nel benefit i Data Table $ 15,500 Cocoa powder Chocolate syrup Boxed assorted chocolates $ 100,000 $ 192,000 Print Done