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Using the contribution margin approach for a special order decision Griffin Company which produces and sells a small digital clock bases its pricing strategy on a 30 percent markup on total cost

Using the contribution margin approach for a special order decision

Griffin Company, which produces and sells a small digital clock, bases its pricing strategy on a 30 percent markup on total cost. Based on annual production costs for 25,000 units of product, computations for the sales price per clock follow.

 

Unit-level costs Fixed costs

$200,000 75,000

Total cost (a) Markup (a × 0.30)

275,000 82,500

Total sales (b)

$357,500

Sales price per unit (b ÷ 25,000)

$ 14.30

 

Required

a. Griffin has excess capacity and receives a special order for 6,000 clocks for $10 each. Calculate the contribution margin per unit; based on it, should Griffin accept the special order?

b. Support your answer by preparing a contribution margin income statement for the special order.

Jul 01 2020 View more View Less

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