Campbell Company, which produces and sells a small digital clock, bases its pricing strategy on a 20 percent markup on total cost. Based on annual production costs for 11,000 units of product, computations for the sales price per clock follow: Unit-level costs Fixed costs $198,000 77,000 275,000 Total cost (a) Markup (a x 0.20) Total sales (b) 55,000 $330,000 Sales price per unit (b + 11,000) 30 Required a. Campbell has excess capacity and receives a special order for 8,000 clocks for $20 each. Calculate the contribution margin per unit. Based on this, should Campbell accept the special order? b. Prepare a contribution margin income statement for the special order.

Campbell Company, which produces and sells a small digital clock, bases its pricing strategy on a 20 percent markup on total cost. Based on annual production costs for 11,000 units of product, computations for the sales price per clock follow: Unit-level costs Fixed costs $198,000 77,000 275,000 Total cost (a) Markup (a x 0.20) Total sales (b) 55,000 $330,000 Sales price per unit (b + 11,000) 30 Required a. Campbell has excess capacity and receives a special order for 8,000 clocks for $20 each. Calculate the contribution margin per unit. Based on this, should Campbell accept the special order? b. Prepare a contribution margin income statement for the special order.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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