Questions 1 and 2 refer to the following problem X Company produces and sells 66

Question

Questions 1 and 2 refer to the following problem X Company produces and sells 66,500 units of its regular product each year for $15.00 each. The following cost information relates to this production Direct materials Direct labor fall variablel Variable overhead Fixed overhead Variable selling Fixed selling Total $164,920 123,025 210,140 146,965 69,160 91,105 Per-Unit $2.48 1.85 3.16 2.21 1.04 1.37 A company has offered to buy 4,110 units for $11.82 each. Because the special order product is slightly different than the regular product, direct material variable costs will increase by $0.20 per unit, and some special equipment will have to be rented at a cost of $17,000 8 pt1. Profit on the special order is 1. AO $4,300 B?$-3,479 C? $-2,905 DO 8-2,256 EO $5,151 FO $6,505 8 2. Assume that if X Company accepts the special order, regular sales will fall by 1,100 units. Independent of #1 the effect of the fall in regular sales will be to decrease company profit by 2. AO $5,694 BO $7,117 CO $8,896 DO $11,120 EO $13,900 FO $17,375

Explanation / Answer

1. Answer: Option A. $-4300

2. Answer: Option B. $7117

Decrease in company profit due to fall in regular sales = $192185 - $185068 = $7117.

Sales (4110 x $11.82) 48580 Less: Expenses Direct materials (4110 x $2.68) 11015 Direct labor (4110 x $1.85) 7604 Variable overhead (4110 x $3.16) 12988 Variable selling (4110 x $1.04) 4274 Rent of special equipment 17000 Total expenses 52880 Profit on special order $ -4300

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