(a) What is meant by the terms contribution and marginal cost?
(b) Barton & Co Ltd make and sell 2,000 units per month of a product ‘Barco’. The selling price is £65 per unit, and unit costs are: direct labour £8; direct materials £17; variable overheads £11. 

Fixed costs per month are £29,400.
The company receives two export orders for completion in September 2016. Order A requests 600 items at a special total price of £20,000; order B requires 750 items at a total price of £34,000.
Order A will require no special treatment, but order B will demand extra processing at a cost of £6 per item. The company has sufficient capacity to undertake either A or B in addition to its current production, but only by paying its direct labour force an overtime premium of 25%.
Calculate the company’s contribution and the profits for the month if:
(i) Normal production only takes place
(ii) Order A is accepted in addition to normal production
(iii) Order B is accepted in addition to normal production.
(c) Use your answer to (b) to demonstrate that a company will normally accept an order which produces a contribution towards overheads.