SKS makes both X-wing and Y-wing starfighters. X-Wing starfighters are more expensive and have significantly higher labor costs. You have the following planned production information for 2013 on each:

Sky Fighters X-Wing Y-Wing

Sales price 180 120

Labor 72 29

Material 41 36

Planned production 100,000 50,000
Total indirect production costs are expected to be $1,500,000 this year. They are most closely related to labor costs.
Fixed costs for 2021 are expected to be 5,000,000 and are allocated evenly to each product line.

a) Create a contribution margin income statement for 2021

b) The New Republic is concerned about increases in the cost of unobtainium which is needed to make starcraft. They want SKS to make a small number (1,000) of experimental starfighters based on the Y-wing but using only $20 of material. All other costs will be the same as the Y-Wing. The New Republic is willing to pay $60 for each experimental starfighter, code-named Zatz-wing.
Based on cost and profit, advise the president of SKS, GEORGE LUCUS, if he should accept the order? 

Answer rating: 100% (QA)

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