Question
Big City Seat Cushions Inc. makes seat cushions for outdoor furniture .Big Citys contribution margin income statement for the month ended March31, 2019 is presented
Big City Seat Cushions Inc. makes seat cushions for outdoor furniture
.Big Citys contribution margin income statement for the month ended
March31, 2019 is presented below: Big City Seat Cushions Inc. Income Statement For the Month Ended
March 31, 2019 Sales in Units 4,200 Sales Revenue $ 58,800 Variable Costs: Manufacturing 25,200 Selling and Administrative
11,000 Total Variable Costs 36,200 Contribution Margin 22,600 Fixed Costs: Manufacturing 12,500
Selling and Administrative 8,700 Total Fixed Costs 21,200 Operating Income $ 1,400
Big City gets a phone call from World wide Outdoor Furniture
They are interested in buying 480 cushions from Big City
. Acceptance of the order will not increase
Big Citys
variable selling and
administrative
costs.
Big City
has enough unused plant capacity to manufacture the a
ddition
al
cushions
(so
no increase in fixed costs)
.
Worldwide
has offered $
7
per
cushion
, which is below the normal sales of $1
4
per
cushion
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