Question

Summer Fun manufactures flotation vests in Tampa, Florida. Summer Fun’s contribution margin income statement for the month ended December 31, 2016, contains the following data:
Suppose Over-town wishes to buy 4,700 vests from Summer Fun. Summer Fun will not incur any variable selling and administrative expenses on the special order. The Summer Fun plant has enough unused capacity to manufacture the additional vests. Over-town has offered $10 per vest, which is below the normal sale price of $15.
Requirements
1. Identify each cost in the income statement as either relevant or irrelevant to Summer Fun’s decision.
2. Prepare a differential analysis to determine whether Summer Fun should accept this special sales order.
3. Identify long-term factors Summer Fun should consider in deciding whether to accept the special sales order.


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  • CreatedJune 15, 2015
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