70.2K

Verified Solution

Link Copied!

Ironwood Company manufactures a variety of sunglasses. Production information for its most popular line, the Clear Vista $($CV$),$ follows:

Suppose Ironwood has been approached about producing a special order for $1,800$ units of custom CV sunglasses for a new

semiprofessional volleyball league. All units in the special order would be produced in the league's signature colors with a specially

designed logo emblem attached to the side of the glasses. The league has offered to pay $$35\mathrm{.}00$ per unit in the special order.

Additional costs for the special order total $$4\mathrm{.}00$ per unit for mixing the special frame color and purchasing the emblem with the

league's logo that will be attached to the glasses.

Required:

Assume Ironwood has the idle capacity necessary to accommodate the special order. Calculate the additional contribution margin

Ironwood would make by accepting the special order.

$2-$a$.$ Calculate the current contribution margin per unit.

$2-$b$.$ Suppose Ironwood is currently operating its production facility at full capacity and accepting the special order would mean

reducing production of its regular $CV$ model. Should Ironwood accept the special order in this case?

Calculate the special order price per unit at which Ironwood is indifferent between accepting or rejecting the special order.

Complete this question by entering your answers in the tabs below.

Assume Ironwood has the idle capacity necessary to accommodate the special order. Calculate the additional contribution

margin Ironwood would make by accepting the special order.

Additional CM

Answer & Explanation Solved by verified expert

See Answer