Required 1. Determine the contribution margin per unit on the order as determined by the controller. 2. Determine the contribution margin per unit on the order as determined by Asiago if he takes the lower commission. 3. Do you recommend Convertco accept the special order? What factors must management consider?

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 10MC: Which of the following is one of the two approaches used to analyze data in the decision to keep or...
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Bert Asiago, a salesperson for Convertco, received an order from a potential new customer for 50,000 units of Convertco’s single product at a price $25 below its regular selling price of $65. Asiago knows that Convertco has the capacity to produce this order without affecting regular sales. He has spoken to Convertco’s controller, Bia Morgan, who has informed Asiago that at the $40 selling price, Convertco will not be covering its variable costs of $42 for the product, and she recommends
the order not be accepted. Asiago knows that variable costs include his sales commission of $4 per unit. If he accepts a $2 per unit commission, the sale will produce a contribution margin of zero. Asiago is eager to get the new customer because he believes that this could lead to the new customer becoming a regular customer.

Required
1. Determine the contribution margin per unit on the order as determined by the controller.
2. Determine the contribution margin per unit on the order as determined by Asiago if he takes the lower
commission.
3. Do you recommend Convertco accept the special order? What factors must management consider?
Transcribed Image Text:Required 1. Determine the contribution margin per unit on the order as determined by the controller. 2. Determine the contribution margin per unit on the order as determined by Asiago if he takes the lower commission. 3. Do you recommend Convertco accept the special order? What factors must management consider?
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