Reference no: EM132187483

Question - Deep Blue's contribution margin income statement for the most recent month contains the following data:

Sales in units 31,000

Sales in revenue $434,000

Variable expenses:

Manufacturing $186,000

Marketing and administrative 110,000

Total variable expenses 296,000

Contribution margin 138,000

Fixed expenses:

Manufacturing 130,000

Marketing and administrative 92,000

Total fixed expenses 222,000

Operating income (loss) $(84,000)

Suppose Boats-n-More wishes to buy 6,000 vests from Deep Blue. Acceptance of the order will not increase Deep Blue's variable marketing and administrative expenses. The Deep Blue plant has enough unused capacity to manufacture the additional vests. Boats-n-More has offered $8 per vest, which is below the normal sale price of $14.

a) Determine whether Deep Blue should accept this special sales order.

b) Identify long-term factors Deep Blue should consider in deciding whether to accept the special sales order.