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Requirement 1. Identify each cost in the income statement as either relevant or irrelevant to Summer Fun's de Variable Manufacturing Costs Variable Selling and Administrative Costs Fixed Manufacturing Costs Fixed Selling and Administrative Costs irrelevant Requirements relevant 1. Identify each cost in the income statement as either relevant or irrelevant to Summer Fun's decision. Prepare a differential analysis to determine whether Summer Fun should accept this special sales order. Identify long-term factors Summer Fun should consider in deciding whether to accept the special sales order. Print Done Click to select your answer(s) and then click Check Answer.

Answer 1

1. Except Variable Manufacturing costs, all other costs are irrelevant to the decision. Variable Selling and Admin costs are already mentioned to be not incurred. Fixed costs are already incurred and won't change with any additional production.

2.Differential Analysis:

	Alternate 1: Reject Order	Alternate 2: Accept Order	Difference	Alternate 1 is:
Sales Revenue	480,000	536,400	56,400	Lower
Variable Costs:
Manufacturing	90,000	104,100	14,100	Lower
Selling & Administrative	105,000	105,000	0	-
Total Variable Costs	195,000	209,100	14,100	Lower
Contribution Margin	285,000	327,300	42,300	Lower
Fixed Costs:
Manufacturing	122,000	122,000	0	-
Selling and Administrative	86,000	86,000	0	-
Total Fixed Costs	208,000	208,000	0	-
Income	77,000	119,300	42300	Lower

Summer Fun should accept the order as the Profit is increased by accepting the order.