Safe Sailing manufactures flotation vests in Charleston, South Carolina. Safe Sailing's contribution margin income statement for the month ended January 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 Safe Sailing'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 Safe Sailing should accept this special sales order. (Enter decreases to revenue or increases to costs with a parentheses or minus sign.) Decision: in operating income Requirement 3. Identify long-term factors Safe Sailing should consider in deciding whether to accept the special sales order. In addition to determining the special order's effect on operating profits, Safe Sailing's managers also should consider the following: Suppose Optimum wishes to buy 4.500 vests from Safe Sailing. Safe Sailing will not incur any variable selling and administrative expenses on the special order. The Safe Sailing plant has enough unused capacity to manufacture the additional vests. Optimum has offered $8 per vest, which is below the normal sales price of $16. O A. Will Safe Sailing's other customers find out about the lower sale price Safe Sailing accepted from Optimum? If so, will these other customers demand lower sale prices? OB. How will Safe Sailing's competitors react? Will they retaliate by cutting their prices and starting a price war? OC. Will the special order customer come back again and again, asking for the same reduced price? O D. All of the above OE. None of the above Requirements 1. Identify each cost in the income statement as either relevant or irrelevant to Safe Sailing's decision. 2. 3. Prepare a differential analysis to determine whether Safe Sailing should accept this special sales order. Identify long-term factors Safe Sailing should consider in deciding whether to accept the special sales order. Data table Safe Sailing Income Statement For the Month Ended January 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 $ $ 30,000 480,000 150,000 106,000 256,000 224,000 123,000 90,000 213,000 11,000
Safe Sailing manufactures flotation vests in Charleston, South Carolina. Safe Sailing's contribution margin income statement for the month ended January 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 Safe Sailing'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 Safe Sailing should accept this special sales order. (Enter decreases to revenue or increases to costs with a parentheses or minus sign.) Decision: in operating income Requirement 3. Identify long-term factors Safe Sailing should consider in deciding whether to accept the special sales order. In addition to determining the special order's effect on operating profits, Safe Sailing's managers also should consider the following: Suppose Optimum wishes to buy 4.500 vests from Safe Sailing. Safe Sailing will not incur any variable selling and administrative expenses on the special order. The Safe Sailing plant has enough unused capacity to manufacture the additional vests. Optimum has offered $8 per vest, which is below the normal sales price of $16. O A. Will Safe Sailing's other customers find out about the lower sale price Safe Sailing accepted from Optimum? If so, will these other customers demand lower sale prices? OB. How will Safe Sailing's competitors react? Will they retaliate by cutting their prices and starting a price war? OC. Will the special order customer come back again and again, asking for the same reduced price? O D. All of the above OE. None of the above Requirements 1. Identify each cost in the income statement as either relevant or irrelevant to Safe Sailing's decision. 2. 3. Prepare a differential analysis to determine whether Safe Sailing should accept this special sales order. Identify long-term factors Safe Sailing should consider in deciding whether to accept the special sales order. Data table Safe Sailing Income Statement For the Month Ended January 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 $ $ 30,000 480,000 150,000 106,000 256,000 224,000 123,000 90,000 213,000 11,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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