Stuart Company, which produces and sells a small digital clock, bases its pricing strategy on a 25 percent markup on total cost. Based on annual production costs for 20,000 units of product, computations for the sales price per clock follow: Unit-level costs $ 420,000 Fixed costs 60,000 Total cost (a) 480,000 Markup (a 0.25) 120,000 Total sales (b) $ 600,000 Sales price per unit (b 20,000) $ 30

Required Stuart has excess capacity and receives a special order for 7,000 clocks for $24 each.

Calculate the contribution margin per unit. Based on this, should Stuart accept the special order?

Prepare a contribution margin income statement for the special order.

• Required A
• Required B

Stuart has excess capacity and receives a special order for 7,000 clocks for $24 each. Calculate the contribution margin per unit. Based on this, should Stuart accept the special order?

Contribution margin per unit
Should Stuart accept the special order?

Prepare a contribution margin income statement for the special order.

STUART COMPANY
Contribution Margin Income Statement