PLEASE ANSWER NUMBER 6 At the end of the year, a company offered to buy 4,590 un

Question

PLEASE ANSWER NUMBER 6

At the end of the year, a company offered to buy 4,590 units of a product from X Company for $11.00 each instead of the company's regular price of $18.00 each. The following functional income statement is for the 67,700 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 $135,400, and fixed selling and administrative costs were $76,501. The special order product has some unique features that will require additional material costs of $0.80 per unit and the rental of special equipment for $4,000.

5. Profit on the special order would be $5,639

6. Assume the following fact: regular variable selling and administrative costs include sales commissions equal to 2% of sales, but there will be no sales commissions on the special order. This will cause the special order profit to increase by

Present Value of $1.00

Present Value of an Annuity of $1.00

Sales $1,218,600    Cost of goods sold    607,946    Gross margin $610,654    Selling and administrative costs      152,325    Profit $458,329   

Explanation / Answer

Profit on special order is calculated as under:

Ignoring fixed costs.

Particulars 67,700 Unit Cost Profit on special order Sales 1218600 18 50490 Cost of goods sold    Variable 4,72,546 6.98 32038.2    Fixed 1,35,400 Gross margin 6,10,654 9.02 18451.8 Selling and administrative costs    Variable sales commissions 51,452 0.76 3488.4    Variable 24,372 0.36    Fixed 76,501 Profit 4,58,329 9.02 14963.4

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

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