Alamo Metal Works produces 300,000 units at 80% of its total capacity. Its fixed factory overhead is $2,500,000. Unit contribution margin is as follows:
Selling price .................................... $35
Variable costs ................................... 25
contribution margin ....................... $10
The military has offered to buy 50,000 units at a one-time price of $27 per unit.
1. Should the company agree to the offer?
2. How much additional contribution margin, if any, would the special order generate?