Hensely 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.............................$240,000
Fixed costs....................................60,000
Total cost (a) ................................300,000
Markup (a × 0.25) ...........................75,000
Total sales (b) .............................$375,000
Sales price per unit (b ÷ 25,000) .............$ 15
Required
a. Hensely has excess capacity and receives a special order for 8,000 clocks for $12 each. Calculate the contribution margin per unit. Based on this, should Hensely accept the special order?
b. Support your answer by preparing a contribution margin income statement for the special order.