Coconut Plantations Pty Ltd manufactures and sells candles, soaps and detergents and distributes them to stores located in Australia and New Zealand. The normal selling price per carton of candles is $25; the variable cost of a carton of candles is $15. The principal of the local primary school has asked Coconut Plantations to provide 20 cartons of candles for its spring fair. The principal wants to purchase the candles at cost. Unlike regular sales, this special order of candles will not incur the average distribution costs of $3 per carton. Coconut Plantations has sufficient capacity to meet the order.

Required
a. Calculate the contribution margin per carton of candles for those sold to the usual outlets.
b. Calculate the variable costs per carton of candles for the special order from the local primary school.
c. If the principal can pay no more than $12 per carton, should Coconut Plantations accept the order? Why?
d. Would your decision change if Coconut Plantations was operating at full capacity and had to give up normal sales of candles to accept the principal’s order?