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Walter Payton Sports Inc. (WPS) is a leading manufacturer of footballs. From January to June of 2021, WPS operated at 50% of production capacity and
Walter Payton Sports Inc. (WPS) is a leading manufacturer of footballs. From January to June of 2021, WPS operated at 50% of production capacity and produced and sold 120,000 footballs. The Company reported operating results as follows: Amount Sales Revenue Cost of Goods Sold Selling and Admin Expense $4,800,000 3,600,000 405,000 The $3,600,000 cost of goods sold included $900,000 of Fixed Costs and 2,700,000 of variable costs. The $405,000 of Selling & Admin Expense includ $225,000 of fixed costs and $180,000 of variable costs. In July, WPS receives a special order for 10,000 footballs at $30 each from the Canadian Football League (CFL). If WPS accepts the order, variable selli and administrative expenses would increase by $1.00 per unit because of increased shipping costs to Canada. However, fixed costs and expenses wou not change. Requirements: a. What is WPS's current net operating income? b. What is WPS's current total contribution margin in dollars? c. Conduct an economic analysis for the proposed special order to show the effect on net operating income from accepting the order. (.e., calculate the amount of the increase or decrease in net operating income from accepting the special order). d. Besides any impact on net operating income, identify one potential drawback (i.e., a qualitative consideration) if WPS accepts the order
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