Flash Pty Ltd manufactures handheld egg-beaters. For the first eight months of 2020, the company reports the following operating results while operating at 80 per cent capacity.

Cost of sales was 65 per cent variable and 35 per cent fixed. Operating expenses were 60 per cent variable and 40 per cent fixed.

In October, Flash Pty Ltd receives a special order for 20000 egg-beaters at $6 each from Rosie Cakes located in New Zealand. Acceptance of the order would result in $5000 of shipping costs but no increase in fixed operating costs.

Required
(a) Calculate the contribution margin per egg-beater for normal sales.

(b) Calculate the contribution margin per egg-beater for the special order.

(c) What is the minimum selling price for the special order?

(d) Should Flash Pty Ltd accept the special order? Explain your answer and show calculations.

Transcribed Image Text:

Sales (400 000 units) Cost of sales Gross profit Operating expenses Profit $2 000 000 1 200 000 800 000 450 000 $ 350 000