Questions 5 and 6 refer to the following information: At the end of the year, a

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Questions 5 and 6 refer to the following information: At the end of the year, a company offered to buy 4,390 units of a product from X Company for a special price of $11.00 each instead of the company's regular price. The following information relates to the 61,900 units of the product that X Company has already made and sold to its regular customers Total Per-Unit Revenue Cost of Goods Sold $1,114,200 $18.00 388,732 130,609 6.28 2.11 Variable Fixed Selling and Administrative Costs Variable Fixed 82,327 86,660 $425,872 1.33 1.40 $6.88 Profit The special order product has some unique features that will require additional material costs of $0.88 per unit and the rental of special equipment for $4,500 5. 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 600 units. This loss in sales will cause firm profits to fall by Submit Answer Tries 0/3

Explanation / Answer

Req 5. INCREMENTAL PROFIT FROM SPECIAL ORDER: Incremental revenue (4390 units @ 11) 48290 Less: Incremental cost Vvariable cost of goods sold (4390 units @ 6.28) 27569.2 Additional material cost (4390 uniits @0.88) 3,863 Variable Selling cost (4390 units @ 1.33) 5838.7 Rental of Special equipment 4,500 Net Increasae in income 6519 Profit from Special order would be $ 6519 Req 6: The Loss of Profit from loss in sales is a s follows; Loss of sales units 600 Contribution margin per unit (18-6.28-1.33) 10.39 Loss of Contribution 6234 Therfore, loss of income will be 6234

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