Question
Hat Trick Manufacturing is considering accepting a special order on hockey sweaters. The customer offered a price 12% lower than the standard price of $60,
Hat Trick Manufacturing is considering accepting a special order on hockey sweaters. The customer offered a price 12% lower than the standard price of $60, but agreed that a lower-quality material could be used. The standard direct materials, direct labor, variable overhead, and fixed overhead for the sweaters are $12.50, $6.20, $3.75, and $2.50, respectively. The standard sales commission is $2.05, and standard shipping is $0.75. Hat Trick expects to be able to fill the special order with existing capacity. Substituting a lower-grade material will reduce the direct materials cost by $3.50 per unit but will increase the direct labor cost by $0.30 per unit. The sales commission will be reduced by $0.55 per unit, and shipping will be reduced by $0.05 per unit. What is the contribution margin for this order?
A : $7.20
B : $38.55
C : $21.45
D : $31.35
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