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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
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.
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a-2. | Should Elsea accept the special order? | ||||
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b. | Prepare a contribution margin income statement for the special order.
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