Question

Safe Sailing manufactures flotation vests in Tampa, Florida. Safe Sailing’s contribution margin income statement for the month ended December 31, 2014, contains the following data:


Suppose Overtown wishes to buy 3,800 vests from Safe Sailing. Acceptance of the order will not increase Safe Sailing’s variable selling and administrative expenses. The Safe Sailing plant has enough unused capacity to manufacture the additional vests. Overtown has offered $ 12 per vest, which is below the normal sale price of $ 20.

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


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  • CreatedJanuary 16, 2015
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