Question

Elsea Company, which produces and sells a small digital clock, bases its pricing strategy on a 25 percent markup on total cost. Based on annual production costs for 25,000 units of product, computations for the sales price per clock follow.
Unit-level costs ........... $190,000
Fixed costs ............ 50,000
Total cost (a) ............ 240,000
Markup (a x 0.25) .......... 60,000
Total sales (b) ........... $300,000
Sales price per unit (b ÷ 25,000) .... $ 12

Required
a. Elsea has excess capacity and receives a special order for 8,000 clocks for $10 each. Calculate the contribution margin per unit. Based on this, should Elsea accept the special order?
b. Support your answer by preparing a contribution margin income statement for the special order.



$1.99
Sales33
Views1149
Comments0
  • CreatedFebruary 07, 2014
  • Files Included
Post your question
5000