core. of 2 pts S8-4 (similar to) Relax Products manufactures t-shirts. It has th

Question

core. of 2 pts S8-4 (similar to) Relax Products manufactures t-shirts. It has the following costs when its production level is 75,000 units (t-shirts): 3 of 11 (2 complete) (Click the icon to view addoa nformation.) (Click the icon to view the costs.) What will happen to Relax's operating income if it accepts this special order? Complete the following incremental analysis to determine the impact on Relax's operating income if it accepts this special order. (Round all per unit amounts to the nearest cent, SX.XX, and all other nearest whole dollar. Enter a "0" for any zero balances. Use parentheses or a minus sign to indicate a decrease in contribution margin and/or operating income from the special order.) Total Order Incremental Analysis of Special Sales Order Decision Per Unit 7,500 units) Revenue from special order Less variable expense associated with the order Direct materials Direct labor Variable manufacturing overhead Contribution margin Less: Additional fixed expenses associated with the order Increase (decrease) in operating income from the special order 45000 Data Table More Info The company's relevant range extends to 87,500 units. Relax has received a special order for 7,500 t-shirts at a special price of $35,625 for the entire order. The special order t-shirt would use a fabric that is less expensive than the standard fabric used by Relax, which would allow Relax to save $0.35 per t-shirt in direct materials when manufacturing this special order. Relax has the excess capacity to manufacture this special order. Its total fixed costs will not be impacted by the special order Total costs for 75,000 units Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead 247,500 45,000 48,750 100,000 441,250 Print Done Total manufacturing costs PrintDone

Explanation / Answer

Incremental analysis :

Per unit Total Revenue from special order 35625 Less: Variable expense associated with order Direct material 2.95 22125 Direct labour 0.60 4500 Variable manufacturing overhead 0.65 4875 Contribution margin 4125 Less: Additional fixed expenses associated with the order 0 Increase (decrease) in operating income from the special order 4125

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