Chapter 20

Li Company produces a product that sells for $100 per unit. The product cost per unit using absorption costing is $70. A customer contacts Li and offers to purchase 3,600 units of this product for $84 per unit. Variable costs of goods sold with this order would be $38 per unit, and variable selling and administrative costs would be $26 per unit. This special order would not require any additional fixed costs, and Li has sufficient capacity to produce this special order without affecting regular sales. (a) Compute contribution margin for this special order. (b) Should Li accept this special order? Complete this question by entering your answers in the tabs below. Compute contribution margin for this special order. Li Company produces a product that sells for $100 per unit. The product cost per unit using absorption costing is $70. A customer contacts Li and offers to purchase 3,600 units of this product for $84 per unit. Variable costs of goods sold with this order would be $38 per unit, and variable selling and administrative costs would be $26 per unit. This special order would not require any additiona fixed costs, and Li has sufficient capacity to produce this special order without affecting regular sales. (a) Compute contribution margin for this special order. (b) Should Ll accept this special order? Complete this question by entering your answers in the tabs below. Should L accept this special order