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 S15.00 each. The following cost information relates to this production: Direct materials Direct labor [all variable 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 wil have to be rented at a cost of $17,000 8pth. Profit on the special order is 1. A? $4,300 BC) $-3,479 C? $2,905 DO $-2,256 EO $5,151 FO $6,505 8 pt 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) profit on Special order Special price 11.82 lessVariable cost Direct materials 2.68 Direct labor 1.85 Variable overhead 3.16 Variable selling 1.04 8.73 contribution per unit 3.09 total contribution (3.09*4,110)= 12699.9 less:Special Equipment cost 17,000 loss on order -4,300 option A) ($4,300) answer 2) contribuion lost on regular sale sale price 15 lessVariable cost Direct materials 2.48 Direct labor 1.85 Variable overhead 3.16 Variable selling 1.04 8.53 contribution per unit 6.47 Decrease in commpany profut 6.47*1,100 7117 option B) $7,117

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