Question No. One: "MBA" Factoryproduces and sells a single product. During the year ended December 31, 2015, the factory utilized 80% of its maximum capacity. The following is factorys actual income statement for the year ended December 31,2015: Per Unit (L.E) Total (in LE 1000s ) 10 1000 Sales Revenue (100000 units) Less: Manufacturing costs 5 500 Variable Manufacturing costs 2 200 Fixed Manufacturing costs 7___ ____ 700 3 300 Gross Profit Less: Selling and Administrative Expenses Variable Selling Expenses 0.5 50 Sales Commissions 0.5 50 Shipping Expenses 1 100 Fixed Selling and Administrative Expenses 2 200 1 100 Net Income The usual selling price was fixed at L.E 10 per unit. The salesmen's commissions are calculated on the basis of a fixed 5% of the usual per unit selling price. Other variable manufacturing and selling expenses vary directly with the quantity of units produced and sold. All production was sold during the year 2015, and the factory does not keep any inventory. The board of the "MBA" Factory insists that some actions must be taken to improve profitability for the coming year 2016. The Chairman of the "MBA" Factory advocates the acceptance of a bulk order which have just been received from a mail order concern for the supply of 25000 units at a reduced per unit selling price of L.E5 .The acceptance of the order will not (To be continued) affect the existing market for 100000 units at the usual per unit selling price of L.E10, also it will not required any salesmens commission. Required: (A) Prepare a contribution margin based income statement for the year ended December 3

1, 2015. (B) For the Coming year 2016, prepare the projected income statement if the 25000 units of the special order are to be produced and sold in addition to the production and sales of the usual 100000 units. (C) The Chairman of "MBA" Factory argument for the acceptance of such order as follows: ".. Our fixed manufacturing costs would have been distributed over 125000 units instead of 100000 units. The added volume would reduce per-unit fixed cost and this reduction would compensate any negative contribution margin this special sales order may generate" . Comment briefly on the argument of the Chairman of "MBA". Question No. Two: