Question 1: Special order Sales volume in units 80 Revenue $7.200 Variable costs $1,600 Contribution margin $5.500 Fixed costs $1,500 Prot $4,100 Special orders: A client wants to buy units at a counted price of $0 per unit. This is a one-time deale, a short-term decision). You have enough spare capacity to fulfil this special order without cutting back on your regular sales a) Use the gross approach to decide whether you should take the special orders status quo (no special total amounts after adding order) the special order Revenue $7,200 Variable costs $1,600 X Contribution margin $5,000 X Fred costs $1,500 x $4,100 4.400 Should you take the special order? Why? YES -- the profit is higher with the special order ONO the low price for the special order reduces the contribution margin YES -- the profit is positive with the social order b) Use the incremental approach to decide whether you should take the special order. how much each amount changes after adding the Increment venue Incremental variable co x YouTube Maps News M Gmail Revenue $7,200 x Variable costs $1,600 Contribution margin $5,600 X Fixed costs $1,500 X Profit $4,100 4400 Should you take the special order? Why? YES the profit is higher with the special order NO -- the low price for the special order reduces the contribution margin O YES the profit is positive with the special order xxxxx x b) Use the incremental approach to decide whether you should take the special order. how much each amount changes after adding the special order Incremental revenud Incremental variable costs Incremental contribution margin Incremental fixed costs 0 Incremental profit x Should you take the special order? Why? NO -- the incremental profit is lower than the original profit OYES -- the incremental profit is positive YES the total profit is positive Submit