* 53% . 11:01 AM s1.lite.msu.edu Verizon At the end of the year, a company offer

Question

* 53% . 11:01 AM s1.lite.msu.edu Verizon At the end of the year, a company offered to buy 4,480 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 68,300 units of the product that X Company has already made and sold to its regular customers: Per- Unit Total Revenue Cost of Goods Sold $1,161,100 $17.00 Variable 428,241 6.27 153,675 2.25 Fixed Selling and Administrative Costs 91,522 1.34 71,032 1.04 $416,630 $6.10 Variable Fixed Profit The special order product has some unique features that will require additional material costs of $0.90 per unit and the rental of special equipment for $2,500 5. Profit on the special order would be Subnmit 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 650 units. This loss in sales will cause firm profits to fall by

Explanation / Answer

Req 1: Incremental income from Special order: Incremental revenue (4480 units @12) 53760 Less: Incrementl cost Variable cost of goods (4480*6.27) 28089.6 Additonal material cost (4480*0.90) 4032 Variable Selling cost (4480*1.34) 6003.2 Additonal rental cost 2500 Net increase in income 13135.2 Req 2: Loss of profits due to loss of sales Sales units 650 units Sales revenue (650*17) 11050 Less: Variable cost (650*7.61 4946.5 Loss of income 6103.5

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