At the end of the year, a company offered to buy 4,570 units of a product from X
ID: 2462471 • Letter: A
Question
At the end of the year, a company offered to buy 4,570 units of a product from X Company for $12.00 each instead of the company's regular price of $19.00 each. The following functional income statement is for the 64,500 units of the product that X Company has already made and sold to its regular customers:
Fixed cost of goods sold for the year was $130,935, and fixed selling and administrative costs were $72,885. The special order product has some unique features that will require additional material costs of $0.90 per unit and the rental of special equipment for $3,000.
What would profit on the special order would be
Assume the following fact: regular variable selling and administrative costs include sales commissions equal to 4% of sales, but there will be no sales commissions on the special order. This will cause the special order profit to increase by Please Show Work
Sales $1,225,500 Cost of goods sold 521,805 Gross margin $703,695 Selling and administrative costs 153,510 Profit $550,185Explanation / Answer
Particulars
Amount
Fixed
Variable
Variable Cost Per Unit
Sales Units
64,500
Sales Price
19
Sales
1,225,500
Less: COGS
521,805
130,935
390,870
6.06
Gross Profit
703,695
Sales& Admin Cost
153,510
72,885
80,625
1.25
Profit
550,185
7.31
Existing
Special Order
Total
Particulars
Amount
Amount
Amount
Sales Price
19
12
Sales Units
64,500
4,570
69,070
Sales
1,225,500
54,840
1,280,340
Less: Variable Cost
COGS @ 6.06 per unit
390,870
27,694
418,564
Additional Material Cost @ 0.90
4,113
Sales& Admin Cost @ 1.25
80,625
3,518.90
84,144
Total Variable Cost
471,495
35,326
506,821
Contribution Margin
754,005
19,514
773,519
Less : Fixed Cost
COGS(521,805-390,870)
130,935
130,935
Sales& Admin Cost(153,510-80,625)
72,885
72,885
Rent Of Special Equipment
3,000
3,000
Total Fixed Cost
203,820
3,000
206,820
Profit
550,185
16,514
566,699
Variable Sales& Admin Cost:
= Sales& Admin Cost @ 1.25 for Special order x no of units- Sales commission of 4% on sales
=(1.25 x 4,570 -54,840 x 4%)=5,712.5-2,193.6=$3,518.90
Profit of Special Order is $ 16,514
Particulars
Amount
Fixed
Variable
Variable Cost Per Unit
Sales Units
64,500
Sales Price
19
Sales
1,225,500
Less: COGS
521,805
130,935
390,870
6.06
Gross Profit
703,695
Sales& Admin Cost
153,510
72,885
80,625
1.25
Profit
550,185
7.31
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