Question
Franklin Company manufactures a personal computer designed for use in schools and markets it under its own label. Franklin has the capacity to produce 45,000
Franklin Company manufactures a personal computer designed for use in schools and markets it under its own label. Franklin has the capacity to produce 45,000 units a year but is currently producing and selling only 15,000 units a year. The computers normal selling price is $1,650 per unit with no volume discounts. The unit-level costs of the computers production are $460 for direct materials, $190 for direct labor, and $200 for indirect unit-level manufacturing costs. The total product- and facility-level costs incurred by Franklin during the year are expected to be $2,150,000 and $810,000, respectively. Assume that Franklin receives a special order to produce and sell 3,180 computers at $1,270 each. Required Calculate the contribution to profit from the special order. Should Franklin accept or reject the special order?
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