Using the contribution margin approach for a special order decision Winchester Company produces and sells a food processor that it prices at a 25 percent markup on total cost. Based on data pertaining to producing and selling 50,000 food processors, Winchester computes the sales price per food processor as follows:

contribution margin approach for a special order decis">

Required
a. Winchester receives a special order for 7,000 food processors for $20 each. Winchester has excess capacity. Calculate the contribution margin per unit for the special order. Based on the contribution margin per unit, should Winchester accept the special order?
b. Support your answer by preparing a contribution margin income statement for the special order.

Transcribed Image Text:

Unit-level costs Fixed costs Total cost (a) Markup (a x .25) Total sales revenue (b) Sales price per unit (b + 50,000) $ 900,000 $1,540,000 385,000 $1,925,000 $38.50