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Problem: Module 6 Textbook Problem 4 Learning Objective: 6-2 Make appropriate special order decisions Thornton Company, which produces and sells a small digital clock,
Problem: Module 6 Textbook Problem 4 Learning Objective: 6-2 Make appropriate special order decisions Thornton 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 15,000 units of product, computations for the sales price per clock follow. Unit-level costs Fixed costs Total cost (a) Markup (a x 0.20) Total sales (b) Sales price per unit (b 15,000) $315,000 85,000 400,000 80,000 $480,000 $ 32 Required a. Thornton has excess capacity and receives a special order for 5,000 clocks for $23 each. Calculate the contribution margin per unit. Based on this, should Thornton accept the special order? b. Prepare a contribution margin income statement for the special order. Complete this question by entering your answers in the tabs below. Required A Required B Thornton has excess capacity and receives a special order for 5,000 clocks for $23 each. Calculate the contribution margin per unit. Based on this, should Thornton accept the special order? Contribution margin per unit Should Thornton accept the special order? Yes
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