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10) Wilder Company produces and sells boxing gloves. Its contribution margin income statement follows: Contribution Margin Income Statement For Year Ended December 31 Sales
10) Wilder Company produces and sells boxing gloves. Its contribution margin income statement follows: Contribution Margin Income Statement For Year Ended December 31 Sales (160,000 units) Variable costs Direct materials Direct labor Variable overhead Contribution margin Fixed costs Fixed overhead Fixed general and administrative Income Per Unit Annual Total $ 100 $ 16,000,000 40 6,400,000 16 2,560,000 24 3,840,000 20 3,200,000 6 4 960,000 640,000 $ 10 $ 1,600,000 A potential customer offers to buy 20,000 units for $84 each. These sales would not affect the company's sales through its normal channels. Details for the special offer follow. Variable costs per unit would not change. Accepting the offer would require incremental fixed overhead costs of $40,000. Accepting the offer would require incremental fixed general and administrative costs of $60,000. Required: (1) Compute income from the special offer. (2) Should the company accept or reject the special offer?
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