Question
You sell high-quality fake IDs to college students at a regular price of $95. Your financial results for 20X9 are summarized in the following contribution
You sell high-quality fake IDs to college students at a regular price of $95. Your financial results for 20X9 are summarized in the following contribution margin statement:
20X9 | |
Sales volume (#units) | 90 |
Revenue | $8,550 |
Variable costs | $1,800 |
Contribution margin | $6,750 |
Fixed costs | $1,300 |
Profit | $5,450 |
Special order: You have been approached by a client who wants to buy 40 units at a discounted price of $35 per unit. You have enough spare capacity to fulfill this special order without cutting back on your regular business (90 units at $95). Required: 1. Compute total profit with the special order (total for the regular business plus the special order). To do that, compute total revenue, costs, etc with special order: Total revenue=$ Total VC=$ Total CM=$ Total FC=$ Profit = $ 2. Make a decision based on total profits with and without the special order. Should you take this special order? (enter 1 if yes, 2 if no)
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