Question

Mayer Company produces and sells a food processor that it prices at a 32 percent markup on total cost. Based on data pertaining to producing and selling 50,000 food processors, Mayer computes the sales price per food processor as follows:
Unit-level costs ............. $ 600,000
Fixed costs .............. 400,000
Total cost (a) .............. $1,000,000
Markup (a x .32) ............ 320,000
Total sales revenue (b) ......... $1,320,000
Sales price per unit (b ÷ 50,000) ..... $ 26.40

Required
a. Mayer receives a special order for 7,000 food processors for $16 each. Mayer has excess capacity. Calculate the contribution margin per unit for the special order. Based on the contribution margin per unit, should Mayer accept the special order?
b. Support your answer by preparing a contribution margin income statement for the special order.



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  • CreatedFebruary 07, 2014
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