At the end of the year, a company offered to buy 4,360 units of a product from X
ID: 2452388 • Letter: A
Question
At the end of the year, a company offered to buy 4,360 units of a product from X Company for a special price of $11.00 each instead of the company's regular price of $19.00 each. The following information relates to the 63,400 units of the product that X Company has already made and sold to its regular customers:
The special order product has some unique features that will require additional material costs of $0.81 per unit and the rental of special equipment for $5,000.
5. Profit on the special order would be
6. The marketing manager thinks that if X Company accepts the special order, regular customers will be lost, with demand falling by 650 units. The effect of this loss of sales will be to decrease firm profits by
Total Per-Unit Revenue $1,204,600 $19.00 Cost of Goods Sold Variable 391,812 6.18 Fixed 126,166 1.99 Selling and Administrative Costs Variable 81,152 1.28 Fixed 67,204 1.06 Profit $538,266 $8.49Explanation / Answer
5. Profit on the special order : 4360 units at $11 per unit
Revenue ( 4360 * $11) $47960
Less: Cost of goods sold :
variable ($6.18 + $0.81) $ 30476.4
Less: Selling and Administrative Costs
Variable ( $1.28 per unit) $5580.8
Rental expenses $5000
Profit $6902.8
Note: fixed costs are not cosidered in calculating of relevant cost .
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