1: Special order Sales volume in units 110 Revenue $9,900 Variable costs $3,300 Contribution margin $6,600 $1,400 Fixed costs Profit $5,200 Special order: A client wants to buy 40 units at a discounted price of $50 per unit. This is a one-time deal (e, a short-term decision). You have special order without cutting back on your regular sales. a) Use the gross approach to decide whether you should take the special order: status quo (no special order) Revenue $9,900 Variable costs $3,300 Contribution margin $6,600 Fixed costs $1,400 Profit $5,200 total amounts after adding the special order Should you take the special order? Why? O YES the profit is positive with the special order O NO the low price for the special order reduces the contribution margin 299 Contribution margin $6,600 Fixed costs $1,400 Profit $5,200 Should you take the special order? Why? OVES the profit is positive with the special order O NO the low price for the special order reduces the contribution margin OVES the profit is higher with the special order b) Use the incremental approach to decide whether you should take the special order. how much each amount changes after adding the special order Incremental revenue Incremental variable costs: Incremental contribution margin Incremental fixed costs Incremental profit Should you take the special order? Why? O YES the incremental profit is positive ONO the incremental profit is lower than the original profit YES the total profit is positive