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Munoz Company, which produces and sells a small digital clock, bases its pricing strategy on a 20 percent markup on total cost. Based on annual

Munoz Company, which produces and sells a small digital clock, bases its pricing strategy on a 20 percent markup on total cost. Based on annual production costs for 20,000 units of product, computations for the sales price per clock follow:

Unit-level costs$440,000Fixed costs60,000Total cost (a)500,000Markup (a 0.20)100,000Total sales (b)$600,000Sales price per unit (b 20,000)$30

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  1. Munoz has excess capacity and receives a special order for 7,000 clocks for $25 each. Calculate the contribution margin per unit. Based on this, should Munoz accept the special order?
  2. Prepare a contribution margin income statement for the special order.

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