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Tobitzu TV produces wall mounts for flat panel television sets

Accounting

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Tobitzu TV produces wall mounts for flat panel television sets. The forecasted income statement for 2009 is as follows:

TOBITZU TV

Budgeted Income Statement

For the Year 2009

Sales ($43 per unit) $4,300,000

Cost of good sold ($32 per unit)(3,200,000)

Gross profit 1,100,000

Selling expenses ($2 per unit) (200,000)

Net income $900,000

 

Additional Information

(1) Of the production costs and selling expenses, $600,000 and $100,000, respectively, are fixed. (2) Tobitzu TV received a special order from a hospital supply company offering to buy 15,500 wall mounts for $28. If it accepts the order, there will be no additional fixed selling expenses, and there is currently sufficient excess capacity to fill the order. The company's sales manager argues for rejecting the order because "we are not in the business of paying $32 to make a product to sell for $28."

 

Do you think the company should accept the special order?

Compute the contribution per unit and total contribution for the special order.

Contribution per unit.