At the end of the year, a company offered to buy 4,430 units of a product from X

Question

At the end of the year, a company offered to buy 4,430 units of a product from X Company for a special price of $12.00 each instead of the company's regular price. The following information relates to the 67,000 units of the product that X Company has already made and sold to its regular customers: Per-Unit $17.00 Total Revenue $1,139,000 Cost of Goods Sold 435,500 127,300 Variable 6.50 Fixed 1.90 Selling and Administrative Costs Variable Fixed 79,730 76,380 $420,090 1.19 1.14 $6.27 Profit The special order product has some unique features that will require additional material costs of $0.71 per unit and the rental of special equipment for $2,500 S. Profit on the special order would be Submit Answer Tries 0/3 6. The marketing manager thinks that if X Company accepts the special order, regular customers will be lost, with demand falling by 700 units. This loss in sales will cause firm profits to fall by

Explanation / Answer

CALCULATION OF THE PROFIT ON THE SALE OF SPECIAL ORDER Units Rate Amount Sales Revenue 4430 $                   12.00 $          53,160.00 Less : Variable Cost of Goods Sold 4430 $                      6.50 $          28,795.00 Less: Selling and Administrative Cost 4430 $                      1.19 $             5,271.70 Less: addittional Material cost 4430 $                      0.71 $             3,145.30 Less: Rental Equipment $             2,500.00 $          13,448.00 Answer = profit increase by $ 13,448 Answer = CALCULATION OF THE LOSS IF THE SPECIAL ORDER ACCEPTED Units Rate Amount Revenue 66300 $                   17.00 $          11,27,100 Less: Variable Cost of Goods Sold 66300 $                      6.50 $             4,30,950 Less: Selling and Administrative Cost 66300 $                      1.19 $                78,897 Less: Fixed Cost Fixed Cost of Goods sold $             1,27,300 Fixed Cost of Selling and administrative Expenses $                76,380 Net Revenue with 66,300 Units(A) $             4,13,573 Net Revenue with 67,000 units (B) $             4,20,090 Loss from the accepting the special project(B-A) $                   6,517 So if we accept the special order than the profit will be fall by $ 6,517

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