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Quick Lift manufactures motorcycle power lift ramps for loading motorcycles into the bed of a...

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Question

Accounting

Quick Lift manufactures motorcycle power lift ramps for loading motorcycles into the bed of a pickup truck in Erin. Quick Lift's contribution margin income statement for the most recent month contains the following data:

Sales in units

150

Sales revenue

$464,000

Variable expenses:

Manufacturing

$270,000

Marketing and administrative and shipping

67,500

Total variable expenses

$337,500

Contribution margin.

$ 126,500

Fixed expenses:

Manufacturing

54,000

Marketing and administrative

26,500

Total fixed expenses

80,500

Operating income.

$46,000

Southern Ontario Riders' Group (SORG) wants to buy 75 lifts from Quick Lift. Acceptance of the order will not increase Quick Lift's variable marketing and administrative expenses or any of its fixed expenses. The Quick Lift plant has enough unused capacity to manufacture the additional lifts. SORG has offered $2,100 per lift, which is below the normal sale price of $3,100.

Required:

1. Prepare an incremental analysis to determine whether Quick Lift should accept this special sales order.

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