Question No. 7 (20 minutes) CBA Inc., a manufacturer, has received a special...
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Question No. 7 (20 minutes) CBA Inc., a manufacturer, has received a special request for 1000 units of its product, widgets, at a price of $ 52.50 per unit. The normal selling price for widgets is $ 60.00per unit. CBA Inc.'s annual capacity of 25,000 units and its current sales are 22,000 units per year. To analyze this special order, Jim Blum, the sales manager, gathered the following budgeted information: $ Direct material cost per unit Direct labour per unit Variable overhead per unit Fixed manufacturing overhead per unit Variable selling and administrative per unit 2.10 1.75 0.96 1.10 10.96 The variable selling and administrative costs per unit represent commissions and would not be incurred on this special order. a) Calculate the increase or decrease in contribution margin that will occur if the order is accepted. b) Assume CBA Inc.'s current sales are 25,000 units annually. Use incremental/differential analysis to support whether CBA should accept this additional 1,000 unit special order or not. State your conclusion as to whether the special order should be accepted or not and why
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