Question
Solomon Company manufactures a personal computer designed for use in schools and markets it under its own label. Solomon has the capacity to produce 31,000
Solomon Company manufactures a personal computer designed for use in schools and markets it under its own label. Solomon has the capacity to produce 31,000 units a year but is currently producing and selling only 17,000 units a year. The computers normal selling price is $1,740 per unit with no volume discounts. The unit-level costs of the computers production are $560 for direct materials, $250 for direct labor, and $130 for indirect unit-level manufacturing costs. The total product- and facility-level costs incurred by Solomon during the year are expected to be $2,100,000 and $820,000, respectively. Assume that Solomon receives a special order to produce and sell 3,120 computers at $1,280 each.
Calculate the contribution to profit from the special order. Should Solomon accept or reject the special order? Contribution to profit Should Solomon accept or reject the special order?
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