Answer:
<u>Contribution margin income statement for the special order-8,000</u>
Sales (8,000× $12) 96,000
Less Variable Costs ($ 240,000/25,000×8,000) (76,800)
Contribution 19,200
Less Fixed Costs 0
Net Income 19,200
The special order results in an incremental income of $19,200, therefore Hensely should accept the special order.
Explanation:
The Fixed Costs are irrelevant for this decision since Hensely has excess capacity and incurrs the expense whether or not the special order is accepted.
<u>Contribution margin income statement for the special order-8,000</u>
Sales (8,000× $12) 96,000
Less Variable Costs ($ 240,000/25,000×8,000) (76,800)
Contribution 19,200
Less Fixed Costs 0
Net Income 19,200
The special order results in an incremental income of 19,200, therefore Hensely should accept the special order
