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Big City Seat Cushions Inc. makes seat cushions for outdoor furniture
.Big Citys contribution margin income statement for the month ended
March31, 2019 is presented below: Big City Seat Cushions Inc. Income Statement For the Month Ended
March 31, 2019 Sales in Units 4,200 Sales Revenue $ 58,800 Variable Costs: Manufacturing 25,200 Selling and Administrative
11,000 Total Variable Costs 36,200 Contribution Margin 22,600 Fixed Costs: Manufacturing 12,500
Selling and Administrative 8,700 Total Fixed Costs 21,200 Operating Income $ 1,400
Big City gets a phone call from World wide Outdoor Furniture
They are interested in buying 480 cushions from Big City
. Acceptance of the order will not increase
Big Citys
variable selling and
administrative
costs.
Big City
has enough unused plant capacity to manufacture the a
ddition
al
cushions
(so
no increase in fixed costs)
.
Worldwide
has offered $
7
per
cushion
, which is below the normal sales of $1
4
per
cushion
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