At the end of the year, a company offered to buy 4,590 units of a product from X
ID: 2463436 • Letter: A
Question
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.
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
Sales $1,218,600 Cost of goods sold 607,946 Gross margin $610,654 Selling and administrative costs 152,325 Profit $458,329Explanation / Answer
Statement showing computations Particulars Amount Per unit = Costs/67,700 Sales 1,218,600.00 18.00 Variable Costs: Cost of goods sold=607946-135400 472,546.00 6.98 Selling and Admin Costs = 152325 - 76501 75,824.00 1.12 Total variable Costs 548,370.00 8.10 Contribtuion = Sales -VC 670,230.00 9.90 Fixed costs Cost of goods sold 135,400.00 Selling and Admin Costs 76,501.00 Total Fixed Costs 211,901.00 Income = contribution - FC 458,329.00 Statement showing computations for special order Particulars Amount Sales = 4590*11 50,490.00 Variable Costs: Cost of goods sold=4590*6.98 32,038.20 Additional mat = 4590*.80 3,672.00 Selling and Admin Costs=4590*1.12 5,140.80 Total variable Costs 40,851.00 Contribtuion = Sales -VC 9,639.00 Fixed costs Cost of goods sold Selling and Admin Costs Rent of special Equipment 4,000.00 Total Fixed Costs 4,000.00 Income = contribution - FC 5,639.00 Q6 Statement showing computations for special order Particulars Amount Sales = 4590*11 50,490.00 Variable Costs: Cost of goods sold=4590*6.98 32,038.20 Additional mat = 4590*.80 3,672.00 Selling and Admin Costs=4590*(1.12 - 18*.02) 3,488.40 Total variable Costs 39,198.60 Contribtuion = Sales -VC 11,291.40 Fixed costs Cost of goods sold Selling and Admin Costs Rent of special Equipment 4,000.00 Total Fixed Costs 4,000.00 Income = contribution - FC 7,291.40
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