Lispell Co A What Costs Are Relevant to This Decision?
B

question 76

Essay

Lispell Co.manufactures in-line skates that sell for $128 a pair.The company is currently operating at capacity,2,000 pairs.A special order from a foreign distributor for 400 pairs of skates at $120 a pair has just been received.In order to accept this order,Lispell Co.would have to give up 400 pairs of its regular sales.However,there would be no sales commission incurred on the order.Shown below are the current costs of operation:
$\begin{array}{|lc}\text { Direct materials } & \$ 48 \\\text { Direct labor } & 12 \\\text { Variable overhead } & 4 \\\text { Fixed overhead } & 5(\$ 10,000\div 2,000 \text { pairs) } \\\text { Variable selling and administrative } & 8 \text { (sales commissions) } \\\text { Fixed selling and administrative } & 4(\$ 8,000\div2,000 \text { pairs) }\end{array}$

a. What costs are relevant to this decision?
b. Provide an incremental analysis to be used in determining whether or not the order should be accepted.
c. Are there any qualitative considerations that need to be addressed? Explain.

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Definitions:

Depression

A psychiatric syndrome involving persistent melancholy or an apathy towards activities, gravely affecting one’s routine life.

Psychoanalytic Theorists

Psychologists or theorists who analyze human behavior, thoughts, and emotions based on unconscious motives and conflicts, following the theories initially proposed by Freud.

Depression

A morale disorder showcased by a continuous blue mood or lack of interest in engagements, significantly deteriorating daily life quality.

Genetic Predisposition

The likelihood of developing certain traits or conditions based on one's genetic makeup.