Payne Company, which produces and sells a small digital clock, bases its pricing strategy on a 35 percent markup on total cost. Based on annual production costs for 10,000 units of product, computations for the sales price per clock follow.

Required
a. Payne has excess capacity and receives a special order for 4,000 clocks for $13 each. Calculate the contribution margin per unit; based on it, should Payne accept the special order?
b. Support your answer by preparing a contribution margin income statement for the specialorder.

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Unit-level costs Fixed costs Total cost (a) Markup (a X 0.35) Total sales (b) Sales price per unit (b10,000) $100,000 50,000 150,000 52,500 S202,500 $20.25