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

1. 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?

contribution margin per unit

should he accept the special order

b. Prepare a contribution margin income statement for the special order.

Required A Required B Prepare a contribution margin income statement for the special order. GIBSON COMPANY Contribution Margin Income Statement