Ironwood Company manufactures a variety of sunglasses. Production information fo

Question

Ironwood Company manufactures a variety of sunglasses. Production information for its most popular line, the Clear Vista (CV), follows: Sales price Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead5.0 Per Unit $43.50 12.00 9.00 3.00 Total manufacturing cost $29.00 Suppose that Ironwood has been approached about producing a special order for 2,000 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 S39.00 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

Explanation / Answer

Incremental revenue 78000 =2000*39 Costs: Diect materials 24000 =2000*12 Direct labor 18000 =2000*9 Variable manufacturing overhead 6000 =2000*3 Additional costs 4000 52000 =2000*2 Additional CM 26000

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