Question
Exercise 6-9A Using the contribution margin approach for a special order decision LO 6-2 Gibson Company, which produces and sells a small digital clock, bases
Exercise 6-9A Using the contribution margin approach for a special order decision LO 6-2 Gibson 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 12,000 units of product, computations for the sales price per clock follow: Unit-level costs $ 276,000 Fixed costs 60,000 Total cost (a) 336,000 Markup (a 0.25) 84,000 Total sales (b) $ 420,000 Sales price per unit (b 12,000) $ 35 Required Gibson has excess capacity and receives a special order for 7,000 clocks for $28 each. Calculate the contribution margin per unit. Based on this, should Gibson accept the special order? Prepare a contribution margin income statement for the special order.
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