Reference no: EM131739861
Problem - Adams 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 12,000 units of product, computations for the sales price per clock follow:
Unit-level costs - $228,000
Fixed costs - 60,000
Total cost (a) - 288,000
Markup (a x 0.25) - 72,000
Total sales (b) - $360,000
Sales price per unit (b ÷ 12,000) - $30
Required
a. Adams has excess capacity and receives a special order for 5.000 clocks for $22 each. Calculate the contribution margin per unit. Based on this, should Adams accept the special order?
b. Prepare a contribution margin income statement for the special order.
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