Question - Special Order Decision
Antiquities, Inc., produces antique-looking books. Management has just received a request for a special order for 2,000 books and must decide whether to accept it. Venus Company, the purchaser, is offering to pay $22.00 per book, which includes $3.00 per book for shipping costs.
The variable production costs per book include $9.20 for direct materials, $4.00 for direct labor, and $3.80 for variable overhead. The current year's production is 22,000 books, and maximum capacity is 25,000 books. Fixed costs, including overhead, advertising, and selling and administrative costs, total $80,000. The usual selling price is $25.00 per book. Shipping costs, which are additional, average $3.00 per book.
Compute the contribution margin per book for the special order.