Question
Elsea Company, which produces and sells a small digital clock, bases its pricing strategy on a 25 percent markup on total cost. Based on annual
Elsea Company, which produces and sells a small digital clock, bases its pricing strategy on a 25 percent markup on total cost. Based on annual production costs for 25,000 units of product, computations for the sales price per clock follow. Unit-level costs $ 190,000 Fixed costs 50,000 Total cost (a) 240,000 Markup (a 0.25) 60,000 Total sales (b) $ 300,000 Sales price per unit (b 25,000) $ 12 Required a-1. Elsea has excess capacity and receives a special order for 8,000 clocks for $10 each. Calculate the contribution margin per unit. (Round your answer to 2 decimal places.) 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
( Direct labor Direct materials Fixed costs Incremental revenue Variable cost)
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