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At the end of the year, X Company had sold 62,100 units of its regular product f

ID: 2357066 • Letter: A

Question

At the end of the year, X Company had sold 62,100 units of its regular product for $875,610. A company offered to buy 4,360 units for $11.88 each. There was enough capacity to produce these additional units. The following cost functions apply to X Company's regular operations: Cost of goods sold $5.92X + $135,378 Selling and administrative expenses $1.04X + $72,036 where X is the number of units produced and sold. Also, because the special order product is slightly different than the regular product, direct material cost per unit will be $0.88 less than the regular direct material cost per unit. Profit on the special order is Assume that regular variable selling and administrative expenses include sales commissions of 3% of dollar sales, and there will be no sales commissions on the special order. As a result, variable selling and administrative expenses per unit for the special order will be Assume that if X Company accepts the special order, it will lose 1,100 regular sales units. The effect of losing these sales will be to decrease profit by

Explanation / Answer

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