Nautical manufactures flotation vests in Tampa, Florida. Nauticals contribution margin income statement for the month ended December
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Question:
Nautical manufactures flotation vests in Tampa, Florida. Nautical’s contribution margin income statement for the month ended December 31, 2018, contains the following data:
Suppose Water Works wishes to buy 4,800 vests from Nautical. Nautical will not incur any variable selling and administrative expenses on the special order. The Nautical plant has enough unused capacity to manufacture the additional vests. Water Works has offered $15 per vest, which is below the normal sales price of $19.
Requirements
- Identify each cost in the income statement as either relevant or irrelevant to Nautical’s decision.
- Prepare a differential analysis to determine whether Nautical should accept this special sales order.
- Identity long—term factors Nautical should consider in deciding whether to accept the special sales order.
Related Book For
Accounting Principles
ISBN: 978-0470533475
9th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
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