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Calculate contribution margin per beater for normal sales

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Reference no: EM132895586

Cisco Pty Ltd manufactures handheld beaters. For the first eight months of 2015, the company reported the following operating results while operating at 80 per cent capacity.

Sales (400 000 units) $4 000 000
Cost of sales $ 2 400 000
Gross profit $1 600 000
Operating expenses $900 000
Profit $ 700 000

Cost of sales was 65 per cent variable and 35 per cent fixed. Operating expenses were 60 per cent variable and 40 per cent fixed. In October, Cisco Pty Ltd receives a special order for 20 000 beaters at $6 each from Angel Cakes located in New Zealand. Acceptance of the order would result in $5000 of shipping costs but no increase in fixed operating costs.

Required:

Please show all working out

a. Calculate the contribution margin per beater for normal sales.

b. Calculate the contribution margin per beater for the special order.

c. What is the minimum selling price for the special order?

d. Should Cisco Pty Ltd accept the special order? Explain your answer and show any calculations.

Reference no: EM132895586

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