Safe Sailing manufactures flotation vests in Calgary. Safe Sailing's contribution margin income statement for the...
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Safe Sailing manufactures flotation vests in Calgary. Safe Sailing's contribution margin income statement for the most recent month contains the following data: View the income statement. Suppose Overton's wants to buy 5,400 vests from Safe Sailing. Acceptance of the order will not increase Safe Sailing's variable marketing and administrative expenses or any of its fixed expenses. The Safe Sailing plant has enough unused capacity to manufacture the additional vests. Overton's has offered $12 per vest, which is below the normal sale price of $15. Requirements 1. Prepare an incremental analysis to determine whether Safe Sailing should accept this special sales order. 2. Identify long-term factors Safe Sailing should consider in deciding whether to accept the special sales order. Sales in units 40,000 Sales revenue 600,000 Variable expenses: Manufacturing ................. \$ 104,000 Marketing and administrative ......, 109,000 Total variable expenses ............. 213,000 Contribution margin. . . . . . . . . . . . . . . . . . 387,000 Fixed expenses: Manufacturing 192,000 Marketing and administrative 108,000
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