Hensely Company, which produces and sells a small digital clock, bases its pricing strategy on a 25 percent markup on the total cost. Based on annual production costs for 25,000 units of product, computations for the sales price per clock follow.
Unit-level costs $ 240,000
Fixed costs 60,000
Total cost (a) 300,000
Markup (a * 0.25) 75,000
Total sales (b) $ 375,000
Sales price per unit (b : 25,000) $ 15
Required
Hensely has excess capacity and receives a special order for 8,000 clocks for $12 each. Calculate the contribution margin per unit. Based on this, should Hensely accept the special order?
Prepare a contribution margin income statement for the special order.
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