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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Having an issue with A & B.
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Transcribed Image Text: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.
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