Mermaid manufactures flotation vests in Charleston, South Carolina. Mermaid\'s c
ID: 2717551 • Letter: M
Question
Mermaid manufactures flotation vests in Charleston, South Carolina. Mermaid's contribution margin income statement for the month ended March 31, 2016, contains the following data:
Sales in Units
29,000
Sales Revenue
$522,000
Variable Costs:
Manufacturing
116,000
Selling and Administrative
102,000
Total Variable Costs
218,000
Contribution Margin
304,000
Fixed Costs:
Manufacturing
130,000
Selling and Administrative
92,000
Total Fixed Costs
222,000
Operating Income
$82,000
a. Suppose Water Works wishes to buy 3,900 vests from Mermaid. Mermaid will not incur any variable selling and administrative expenses on the special order. The Mermaid plant has enough unused capacity to manufacture the additional vest. Water Works has offered $11 per vest, which is below the normal sales price of $18. Prepare a differential analysis to determine whether Mermaid should accept this special sales order.(Enter decreases to profits with a parentheses or minus sign.)
Expected increase in revenue: ?
Expected increase in variable manufacturing costs: ?
Expected increase in operating in operating income: ?
All that is needed are the three responses. Another post of this same question has the incorrect reponse.
Expected increase in revenue: ?
Expected increase in variable manufacturing costs: ?
Expected increase in operating in operating income: ?
Explanation / Answer
Statement showing Computations Particulars Amount Expected increase in revenue (3900*11) 42,900.00 Expected increase in variable manufacturing costs - (116,000/29000)*3900 15,600.00 Expected increase in operating in operating income (42,900-15,600) 27,300.00