Buoy manufactures flotation vests in Charleston, South Carolina. Buoy’s contribution margin income statement for the month ended December 31, 2014, contains the following data:

Suppose Overboard wishes to buy 3,900 vests from Buoy. Acceptance of the order will not increase Buoy’s variable selling and administrative expenses. The Buoy plant has enough unused capacity to manufacture the additional vests. Overboard has offered $ 8 per vest, which is below the normal sales price of $ 17.

1. Identify each cost in the income statement as either relevant or irrelevant to Buoy’s decision. 2. Prepare a differential analysis to determine whether Buoy should accept this special sales order.
3. Identify long- term factors Buoy should consider in deciding whether to accept the special salesorder.

  • CreatedJanuary 16, 2015
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