At the end of the year, a company offered to buy 4,520 units of a product from X

Question

At the end of the year, a company offered to buy 4,520 units of a product from X Company for $11.00 each instead of the company's regular price of $17.00 each. The following functional income statement is for the 65,500 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 $119,865, and fixed selling and administrative costs were $73,360. 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 $5,000.

5. Profit on the special order would be

6. Assume the following fact: regular variable selling and administrative costs include sales commissions equal to 3% of sales, but there will be no sales commissions on the special order. This will cause the special order profit to increase by

Sales $1,113,500    Cost of goods sold    562,645    Gross margin $550,855    Selling and administrative costs      146,720    Profit $404,135   

Explanation / Answer

Statement showing computations Particulars Amount Per unit = Costs/65,500 Sales                                   1,113,500.00                                         17.00 Variable Costs: Cost of goods sold=562645 - 119865                                       442,780.00                                           6.76 Selling and Admin Costs = 146720 - 73360                                         73,360.00                                           1.12 Total variable Costs                                       516,140.00                                           7.88 Contribtuion = Sales -VC                                       597,360.00                                           9.12 Fixed costs Cost of goods sold                                       119,865.00 Selling and Admin Costs                                         73,360.00 Total Fixed Costs                                       193,225.00 Income = contribution - FC                                       404,135.00 Q5 Statement showing computations for special order Particulars Amount Sales = 4520*11                                         49,720.00 Variable Costs: Cost of goods sold=4520*6.76                                         30,555.20 Additional mat = 4520*.80                                            3,616.00 Selling and Admin Costs=4520*1.12                                            5,062.40 Total variable Costs                                         39,233.60 Contribtuion = Sales -VC                                         10,486.40 Fixed costs Cost of goods sold Selling and Admin Costs Rent of special Equipment                                            5,000.00 Total Fixed Costs                                            5,000.00 Income = contribution - FC                                            5,486.40 Q6 Statement showing computations for special order Particulars Amount Sales = 4520*11                                         49,720.00 Variable Costs: Cost of goods sold=4520*6.76                                         30,555.20 Additional mat = 4520*.80                                            3,616.00 Selling and Admin Costs=4520*(1.12-17*.03)                                            2,757.20 Total variable Costs                                         36,928.40 Contribtuion = Sales -VC                                         12,791.60 Fixed costs Cost of goods sold Selling and Admin Costs Rent of special Equipment                                            5,000.00 Total Fixed Costs                                            5,000.00 Income = contribution - FC                                            7,791.60

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