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

Question

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.

Help In Homework · Accepted Answer

Computation of Contribution per Unit and Total Contribution for the Special Order: No. of units sold = 4,300,000 / 43 = 100,000 units Total cost of goods sold = $ 3,200,000 Less: Fixed cost of goods sold ($600,000+$100,000) = $ 700,000 Variable Cost of goods sold = $ 2,500,000 No. of units = 100,000 Variable cost of goods sold per unit = 2,500,000/100,000 = $25 Selling units = 15,500 Selling price = $28 Variable cost of goods sold per unit = $25 Contribution per unit = Selling price - Variable cost = $28 - $25 = $3 Total contribution unit = 15,500 * $3 = $46,500 Net benefit = $46,500 Accepting the special order Tobitzu TV get benefit of $46,500.

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Tobitzu TV produces wall mounts for flat panel television sets

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