At the end of the year, a company offered to buy 4,590 units of a product from X

Question

At the end of the year, a company offered to buy 4,590 units of a product from X Company for a special price of $11.00 each instead of the company's regular price of $18.00 each. The following information relates to the 61,700 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 $0.86 per unit and the rental of special equipment for $2,000.

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 700 units. The effect of this loss of sales will be to decrease firm profits by

Total   Per-Unit Revenue $1,110,600 $18.00    Cost of Goods Sold    Variable 396,114 6.42       Fixed 120,315 1.95    Selling and Administrative Costs    Variable   63,551   1.03       Fixed     62,317   1.01    Profit $468,303 $7.59   

Explanation / Answer

The revenue will decrase by $7385 with the drop in sales by 700 units

Total   Per-Unit Additional sales Revenue          1,110,600       18.00                        50,490 Cost of Goods Sold    Variable              396,114         6.42                        29,468    Fixed              120,315         1.95                                 -   Selling and Administrative Costs    Variable                63,551         1.03                          4,728    Fixed                62,317         1.01                                 -   Profit              468,303         7.59 Additional cost                          3,947 Rental cost                          2,000 Additional profit                        10,347

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.