Using the contribution margin approach for a special order decision Shenyang 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.

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Required
a. Shenyang has excess capacity and receives a special order for 4,000 clocks for $17 each. Calculate the contribution margin per unit; based on it, should Shenyang accept the special order?
b. Support your answer by preparing a contribution margin income statement for the special order.

Unit-level costs Fixed costs Total cost (a) Markup (a x 0.35) Total sales (b) Sales price per unit (b $150,000 50,000 200,000 70,000 $270,000 27 2$ + 10,000)