Question 2
1.5 pts
Mugshot Monday, Inc (MMI) sells ceramic mugs for $20. Their maximum capacity is 75,000 mugs per period.
Use the information below to determine whether MMI should accept a new order at a lower sales price. Assume taking this order will not impact their existing customer base.
Use whole dollars only. Do not use the dollar ($) sign.
MMI Sales and Cost Information for the Current Period
Current Period Information
Per Unit
Total
Sales
20
1,125,000
Direct Materials
1.50
84,375
Direct Labor
8.00
450,000
Variable Overhead ($0.50 per DL$)
4.00
225,000
Fixed Overhead ($0.50 per DL$) -- allocated
5.60
315,000
Total Product Cost
19.10
1,074,375
Variable selling expense (5% of sales dollars)
1.00
56,250
Fixed selling expense (allocated based on units sold)
.50
28,125
A new customer wishes to purchase 10,000 mugs for $12/unit. Calculate the Contribution Margin on this order.
Calculate the CM on the new order
New Order
Dollar Value
Sales
Direct Materials
Direct Labor
Variable Overhead
Variable Selling
Total Variable Costs
Contribution Margin
