Alton Incorporated is working at full production capacity producing $40,000$ units of a unique product. Manufacturing costs per unit for the product are as follows:

Direct materials

$ $11$

Direct labor

$10$

Manufacturing overhead

$12$

Total manufacturing cost per unit

$ $33$

The per$-$unit manufacturing overhead cost is based on a $$6$ variable cost per unit and $$240,000$ fixed costs. The nonmanufacturing costs, all variable, are $$8$ per unit, and the sales price is $$68$ per unit.

Sports Headquarters Company $($SHC$)$ has asked Alton to produce $6,600$ units of a modification of the new product. This modification would require the same manufacturing processes. However, because of the nature of the proposed sale, the estimated nonmanufacturing costs per unit are only $$4($not $$8).$ Alton would sell the modified product to SHC for $$53$ per unit.

Required

$1-$a$.$ Calculate the contribution margin for $6,600$ units for both the current and special order.

Contribution Margin

Current

Special order

$1-$b$.$ Should Alton produce the special order for SHC$?$

Yes

No

$2.$ Suppose that Alton Incorporated had been working at less than full capacity to produce $34,000$ units of the product when SHC made the offer. What is the minimum price per unit that Alton should accept for the modified product under these conditions?

Minimum Price