Reference no: EM132548759

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

Direct materials $160

Direct labor 70

Manufacturing overhead (60% variable) 240

Selling expenses (60% variable) 80

Administrative expenses (10% variable) 40

Total per unit $590

• A company recently approached Stanten with a special order to purchase 900 units for $580. Stanten currently sells the models to dealers for $1,000. Capacity is sufficient to produce the extra 900 units. No selling expenses would be incurred on the special order.

Question 1. Ignoring the special order, make a contribution margin income statement that shows the operating profit of the 6,000 units Stanten currently sells

Question 2. Determine the impact on profit of accepting the order. Should Stanten accept the special order?

Question 3. Determine the minimum price Stanten would need on the special order so that before tax profits would increase by $312,300