1.

R&W Manufacturing Company produces mens hiker shorts. The selling price of the shorts is $35. The following standard cost data per unit includes $7 direct material, $4 direct labor and $12 manufacturing overhead (50% variable, 50% fixed). R&W has received a special order for 200 at a price of $20 each. The only additional cost of accepting the special order is a sales commission of $1 per unit. R&W has ample capacity to produce the special order without interrupting regular production. Ignoring qualitative factors, should R&W accept the special order?

2.

Bivouac Camping Supply sells harsh weather tents. The company has the following income statement.

Sales ($1,000 per unit)		$200,000
Less Cost of Goods sold ($475 per unit)		95,000
Gross margin		105,000
Less Operating costs
Salaries	$40,000
Advertising	10,000
Sales commissions ($5 per unit)	1,000
Shipping ($20 per unit)	4,000	55,000
Operating income		$ 50,000

Required:

What is the contribution margin per unit?

What is the contribution margin ratio?

What is the breakeven point in units? In sales dollars?

What is the margin of safety in units? In dollars?