Question
Walton Company manufactures a personal computer designed for use in schools and markets it under its own label. Walton has the capacity to produce 44,000
Walton Company manufactures a personal computer designed for use in schools and markets it under its own label. Walton has the capacity to produce 44,000 units a year but is currently producing and selling only 12,000 units a year. The computers normal selling price is $1,690 per unit with no volume discounts. The unit-level costs of the computers production are $520 for direct materials, $200 for direct labor, and $200 for indirect unit-level manufacturing costs. The total product- and facility-level costs incurred by Miko during the year are expected to be $2,280,000 and $804,000, respectively. Assume that Miko receives a special order to produce and sell 3,030 computers at $1,250 each.
Required Calculate the contribution to profit from the special order. Should Walton accept or reject the special order?
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