Calculate the impact on contribution margin

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Reference no: EM133342143

Case: Gleason manufactures a single product with the following full unit costs for 6,000 units:

Direct materials $160

Direct labor 80

Manufacturing overhead (40% variable) 240

Selling expenses (60% variable) 80

Administrative expenses (10% variable) 40

Total per unit. 5600

A company recently approached Gleason with a special order to purchase 1,000 units for $550.

Gleason currently sells the models to dealers for Sl,00 per unit.. Capacity is sufficient to produce the extra 1,000 units. No selling expenses would be incurred on the special order.

a) Calculate Gleason's existing contribution margin on production and sales of 6,000 units

b) Calculate the impact on contribution margin of accepting the order and conclude if the order should be accepted to maximize short term profit?

c.Calculate the minimum price Gleason would want in order to increase pre-tax profit by $ 60,000 if this special order was accepted.

Reference no: EM133342143

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