Elsea Company, which produces and sells a small digital clock, bases its pricing strategy on a 20 percent markup on total cost. Based on annual production costs for 10,000 units of product, computations for the sales price per clock follow.

Unit-level costs	$	130,000
Fixed costs		70,000
Total cost (a)		200,000
Markup (a 0.20)		40,000
Total sales (b)	$	240,000
Sales price per unit (b 10,000)	$	24

Required

a-1.

Elsea has excess capacity and receives a special order for 8,000 clocks for $18 each. Calculate the contribution margin per unit from the special order.

	Contribution margin

a-2.

Should Elsea accept the special order?

	Yes
	No

b.

Prepare a contribution margin income statement for the special order.

ELSEA COMPANY
Income Statement
Fixed costs