Pontotoc Industries manufactures a product that is used as a subcomponent by other manufacturers. It has the following price and cost structure:
Selling price $300
Direct materials $40
Direct labor 30
Variable manufacturing overhead 24
Fixed manufacturing overhead 60
Variable selling 6
Fixed selling and administrative 20 (180)
Operating margin $120
Pontotoc received a special, one-time order for 1,000 units of its product. However, Pontotoc has an alternative use for this capacity that will result in a contribution of $20,000. The minimum unit price for this special, one-time order is in excess of