VideoSecu produces wall mounts for flat screen TVs. Assume that the expected income statement for the coming
Question:
VideoSecu produces wall mounts for flat screen TVs. Assume that the expected income statement for the coming year is as follows:
VideoSecu Budgeted income statement for the year | |
---|---|
Sales ($28 per unit) | $5,600,000 |
Cost of Good Sold ($19 per unit) | (3,800,000) |
Gross profit | 1,800,000 |
Selling Expenses ($5 per unit) | (1,000,000) |
Net Income | $800,000 |
additional information
(1) Fixed costs of production and sales expenses are $1,520,000 and $750,000, respectively.
(2) VideoSecu received a special order from a hospital supply company offering to purchase 10,000 wall mounts for $15. If you accept the order, there will be no additional selling costs, and there is currently enough spare capacity to fulfill the order. The company's sales manager argues in favor of rejecting the order because "we are not in the business of paying $19 to make a product that sells for $15."
Required
Do you think the company should accept the special order?
Calculate the contribution per unit and the total contribution for the special order.
Contribution per unit. Note: Round your answer to two decimal places.
Cornerstones of Financial and Managerial Accounting
ISBN: 978-1111879044
2nd edition
Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen