# 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.

You'll get 1 file (10.1KB)