Question 1: Special order Sales volume in units 110 Revenue $6,600 Variable costs $2,200 Contribution margin $4,400 Fixed costs $1,500 Profit $2,900 Special order: A client wants to buy 40 units at a discounted price of $40 per unit. This is a one-time deal (i.e., a short-term decision). You have enough spare capacity to fulfill this special order without cutting back on your regular sales. a) Use the gross approach to decide whether you should take the special order: status quo (no special total amounts after adding order) the special order Revenue $6,600 8200 Variable costs $2,200 3800 x Contribution margin $4,400 Fixed costs $1,500 Profit $2,900 Should you take the special order? Why? NO -- the low price for the special order reduces the contribution margin YES -- the profit is positive with the special order YES -- the profit is higher with the special order x