Rooney Company, which produces and sells a small digital clock, bases its pricing strategy on...
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Accounting
Rooney Company, which produces and sells a small digital clock, bases its pricing strategy on a 25 percent markup on total cost. Based on annual production costs for 18,000 units of product, computations for the sales price per clock follow:
| Unit-level costs | $ | 288,000 | |
| Fixed costs | 72,000 | ||
| Total cost (a) | 360,000 | ||
| Markup (a 0.25) | 90,000 | ||
| Total sales (b) | $ | 450,000 | |
| Sales price per unit (b 18,000) | $ | 25 | |
Required
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Rooney has excess capacity and receives a special order for 4,000 clocks for $20 each. Calculate the contribution margin per unit. Based on this, should Rooney accept the special order?
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Prepare a contribution margin income statement for the special order.
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