Reference no: EM132596583

Sabrina Inc manufactures a single product with the following full unit costs for 100,000 units:

Direct materials$20

Direct labor 7

Manufacturing overhead (60% variable)24

Selling expenses (60% variable)14

Administrative expenses (10% variable) 5

Total per unit$70

A company recently approached Sabrina Inc with a special order to purchase 9,000 units for $70. Sabrina Inc currently sells the models to dealers for $95. Capacity is sufficient to produce the extra 9,000 units. Fixed selling expenses would not be incurred on the special order.

Question 1. Ignoring the special order, create a contribution margin income statement that shows the operating profit of the 100,000 units Sabrina Inc currently sells

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

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