Franklin Company, which produces and sells a small digital clock, bases its pricing strategy on a 35 percent markup on total cost.Based on annual production costs for 12,000 units of product, computations for the sales price per clock follow.Unit-level costs$240,00080,000320,000112,000$432,000Fixed costsTotal cost (a)Markup (a x 0.35)Total sales (b)Sales price per unit (b + 12,000)Requireda. Franklin has excess capacity and receives a special order for 5,000 clocks for $24 each. Calculate the contribution margin per unit.Based on this, should Franklin accept the special order?b. Prepare a contribution margin income statement for the special order.

Name: Franklin Company, which produces and sells a small digital clock, bas
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Description: Franklin Company, which produces and sells a small digital clock, bases its pricing strategy on a 35 percent markup on total cost.Based on annual production costs for 12,000 units of product, computations for the sales price per clock follow.Unit-le

Contribution margin is computed by subtracting the variable cost of production from the sales price.

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Franklin Company, which produces and sells a small digital clock, bases its pricing strategy on a 35 percent markup on total cost. Based on annual production costs for 12,000 units of product, computations for the sales price per clock follow. Unit-level costs $240,000 Fixed costs Total cost (a) 80,000 Markup (a x 0.35) Total sales (b) 320,000 112,000 $432,000 Sales price per unit (b + 12,000) 36 Required a. Franklin has excess capacity and receives a special order for 5,000 clocks for $24 each. Calculate the contribution margin per unit. Based on this, should Franklin accept the special order? b. Prepare a contribution margin income statement for the special order.

Franklin Company, which produces and sells a small digital clock, bases its pricing strategy on a 35 percent markup on total cost. Based on annual production costs for 12,000 units of product, computations for the sales price per clock follow. Unit-level costs $240,000 Fixed costs Total cost (a) 80,000 Markup (a x 0.35) Total sales (b) 320,000 112,000 $432,000 Sales price per unit (b + 12,000) 36 Required a. Franklin has excess capacity and receives a special order for 5,000 clocks for $24 each. Calculate the contribution margin per unit. Based on this, should Franklin accept the special order? b. Prepare a contribution margin income statement for the special order.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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