Question 8 0.6t poin ronwood Company manufactures a variety of sunglasses Produc

Question

Question 8 0.6t poin ronwood Company manufactures a variety of sunglasses Production intformation for its most popular Iine the Clear Vista (CV),ollow 20 00 Suppose that Ironwood has been approached about order wouid te produced in the league's signature colors wih a specially designed logo emblem atached to te side of the glasses The league has offered lo pay 568.00 per unit in the producing a special onden for 2.800 units of custom CV sunglasses for a new semiprofesional voleytbat leagua Alunits in the special 1. Assume ronwood has the idle capacity necessary to accommodate the special order. Calo the addiional contrbution magin Ionwood would nake by accepting e specialor 2-a. Caloulale the current contribution magin per unit (Round your answer o2 decimal places) command option option command

Explanation / Answer

1. Additional CM = total sale price – total variable costs for the special order

= (2800 units*$49 per unit) – [2800 units*( 20+10+6+3)

= (2800*49) – (2800*39)

= $28,000 (this will mean a CM per unit of 28000/2800 = 10 per unit)

2a. Current contribution margin per unit = sale price per unit – variable costs per unit

= 51.50 – 20 – 10 – 6

= $15.50 per unit

2b: CM per unit in case of special order = $28,000/2800 units = $10 per unit

This is less than the current contribution margin of $15.50 per unit.

Thus the answer is “NO”

3. Let the price at point of indifference be “x”. Thus CM/unit in case of special order = x – 20 – 10 – 6 – 3 = x-39

Current CM per unit = $15.50

Thus at point of indifference x-39 = 15.5

Or x = $54.50

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