Deep Sea manufactures flotation vests in Charleston, South Carolina. Deep Sea's contribution margin income statement for the month ended March 31, 2024, contains the following data: (Click the icon to view the cost information.) Read the requirements. Requirement 1. Identify each cost in the income statement as either relevant or irrelevant to Deep Sea's decision. Variable Manufacturing Costs Variable Selling and Administrative Costs Fixed Manufacturing Costs Fixed Selling and Administrative Costs Requirement 2. Prepare differential analysis Decision: in operating income ▼ ▼ ▼ C determine whether Deep Sea should accept this special sales order. (Enter decreases to revenue or increases to costs with a parentheses or minus sign.) Requirement 3. Identify long-term factors Deep Sea should consider in deciding whether to accept the special sales order. In addition to determining the special order's effect on operating profits, Deep Sea's managers also should consider the following Suppose Overboard wishes to buy 4,000 vests from Deep Sea. Deep Sea will not incur any variable selling and administrative expenses on the special order. The Deep Sea plant has enough unused capacity to manufacture the additional vests. Overboard has offered $7 per vest, which is below the normal sales price of $15. O A. How will Deep Sea's competitors react? Will they retaliate by cutting their prices and starting a price war? O B. Will Deep Sea's other customers find out bout the lower sale price Deep Sea accepted from Overboard? If so, O C. Will the special order customer come back again and again, asking for the same reduced price? OD. All of the above OE. None of the above I these other customers demand lower sale prices?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
icon
Concept explainers
Topic Video
Question
Data table
Deep Sea
Income Statement
For the Month Ended March 31, 2024
Sales in Units
Net Sales Revenue
Variable Costs:
Manufacturing
Selling and Administrative
Total Variable Costs
Contribution Margin
Fixed Costs:
Manufacturing
Selling and Administrative
Total Fixed Costs
Operating Income
$
35,000
525,000
175,000
103,000
278,000
247,000
123,000
93,000
216,000
31,000
Transcribed Image Text:Data table Deep Sea Income Statement For the Month Ended March 31, 2024 Sales in Units Net Sales Revenue Variable Costs: Manufacturing Selling and Administrative Total Variable Costs Contribution Margin Fixed Costs: Manufacturing Selling and Administrative Total Fixed Costs Operating Income $ 35,000 525,000 175,000 103,000 278,000 247,000 123,000 93,000 216,000 31,000
Deep Sea manufactures flotation vests in Charleston, South Carolina. Deep Sea's contribution margin income statement
for the month ended March 31, 2024, contains the following data:
(Click the icon to view the cost information.)
Read the requirements.
Requirement 1. Identify each cost in the income statement as either relevant or irrelevant to Deep Sea's decision.
Variable Manufacturing Costs
Variable Selling and Administrative Costs
Fixed Manufacturing Costs
Fixed Selling and Administrative Costs
Requirement 2. Prepare a differential analysis to determine whether Deep Sea should accept this special sales order. (Enter decreases to revenue or increases to costs with a parentheses or minus sign.)
Decision:
in operating income
▼
Suppose Overboard wishes to buy 4,000 vests from Deep Sea. Deep Sea will not incur any variable selling and
administrative expenses on the special order. The Deep Sea plant has enough unused capacity to manufacture the
additional vests. Overboard has offered $7 per vest, which is below the normal sales price of $15.
Requirement 3. Identify long-term factors Deep Sea should consider in deciding whether to accept the special sales order.
In addition to determining the special order's effect on operating profits, Deep Sea's managers also should consider the following:
O A. How will Deep Sea's competitors react? Will they retaliate by cutting their prices and starting a price war?
O B. Will Deep Sea's other customers find out about the lower sale price Deep Sea accepted from Overboard? If so, will these other customers demand lower sale prices?
O C. Will the special order customer come back again and again, asking for the same reduced price?
OD. All of the above
O E. None of the above
Transcribed Image Text:Deep Sea manufactures flotation vests in Charleston, South Carolina. Deep Sea's contribution margin income statement for the month ended March 31, 2024, contains the following data: (Click the icon to view the cost information.) Read the requirements. Requirement 1. Identify each cost in the income statement as either relevant or irrelevant to Deep Sea's decision. Variable Manufacturing Costs Variable Selling and Administrative Costs Fixed Manufacturing Costs Fixed Selling and Administrative Costs Requirement 2. Prepare a differential analysis to determine whether Deep Sea should accept this special sales order. (Enter decreases to revenue or increases to costs with a parentheses or minus sign.) Decision: in operating income ▼ Suppose Overboard wishes to buy 4,000 vests from Deep Sea. Deep Sea will not incur any variable selling and administrative expenses on the special order. The Deep Sea plant has enough unused capacity to manufacture the additional vests. Overboard has offered $7 per vest, which is below the normal sales price of $15. Requirement 3. Identify long-term factors Deep Sea should consider in deciding whether to accept the special sales order. In addition to determining the special order's effect on operating profits, Deep Sea's managers also should consider the following: O A. How will Deep Sea's competitors react? Will they retaliate by cutting their prices and starting a price war? O B. Will Deep Sea's other customers find out about the lower sale price Deep Sea accepted from Overboard? If so, will these other customers demand lower sale prices? O C. Will the special order customer come back again and again, asking for the same reduced price? OD. All of the above O E. None of the above
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 2 images

Blurred answer
Knowledge Booster
Costing Systems
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education