Chapter 8, Problem 8.49AP

Special order decision and considerations (Learning Objective 3)

Coastal Safety manufactures flotation vests in Miami, Florida. Coastal Safety’s contribution margin income statement for the most recent month contains the following data:

8.3-31 Full Alternative Text

Suppose Dazzle Cruiselines wants to buy 4,600 vests from Coastal Safety. Acceptance of the order will not require any variable selling and administrative expenses. The special order will not affect fixed expenses. The Coastal Safety plant has enough unused capacity to manufacture the additional vests. Dazzle Cruiselines has offered $7 per vest, which is below the normal sale price of $15.

Requirements

1. 1. Prepare an incremental analysis to determine whether Coastal Safety should accept this special sales order.
2. 2. Identify long-term factors that Coastal Safety should consider in deciding whether to accept the special sales order.