Survey of Accounting: E13-7 Elsea Company, which produces and sells a small digital clock

Survey of Accounting 
E13-7 Using the contribution margin approach for a special order decision 
Elsea Company, which produces and sells a small digital clock, bases its pricing strategy on a 20 percent markup on total cost. Based on annual production costs for 11,000 units of product, computations for the sales price per clock follow. 
Unit-level costs 150,000 
Fixed costs 50,000 
Total cost (a) 200,000 
Markup (a × 0.35) 70,000 
Total sales (b) $270,000 
Sales price per unit (b ÷ 11,000) $24.55 

Required: 
a. Elsea has excess capacity and receives a special order for 8,000 clocks for $20 each. Calculate the contribution margin per unit; based on it, should Elsea accept the special order? 
b. Support your answer by preparing a contribution margin income statement for the special order.
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