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l File Edit View History Bookmarks Window Help ezto.mheducation.com Assigned Practice Problems Chapter 7 tal Analysis for Short-Term Ironwood Company manufactures a variety of sunglasses. Production Iinformation for its most popular line, the Clear Vista (CV), follows: Per Unit Sales price Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $ 45.50 14.00 10.00 5.00 5.00 Total manufacturing cost Suppose that Ironwood has been approached about producing a special order for 2,200 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. Th league has offered to pay $42.00 per unit in the special order. Additional costs for the special order total $2.00 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 1. 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. I CM 2-a. Calculate the current contribution margin per unit. (Round your answer to 2 decimal places.) CM per Unit 2-b. Suppose ironwood is currenty 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? NoExplanation / Answer
1.additional contribution margin from special order:
working:
(5.00)
2a.current contribution margin per unit:
working:
2b.No.
Sine the contrbution of special order is (16.50-11.00)=>$5.50 less than existig contribution per unit.
3.
special price to be indifferent = offered special price + deficit in contribution per unit =>$42.00+5.50=>$47.50.
addtional contribution margin 11.00Related Questions
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