At the end of the year, a company offered to buy 4,780 units of a product from X

Question

At the end of the year, a company offered to buy 4,780 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 63,900 units of the product that X Company has already made and sold to its regular customers:

The special order product has some unique features that will require additional material costs of $0.75 per unit and the rental of special equipment for $3,500.

5. Profit on the special order would be

6. The marketing manager thinks that if X Company accepts the special order, regular customers will be lost, with demand falling by 950 units. This loss in sales will cause firm profits to fall by

Total    Per-Unit Revenue $1,214,100 $19.00    Cost of Goods Sold    Variable 398,097 6.23       Fixed 116,298 1.82    Selling and Administrative Costs    Variable   91,377   1.43       Fixed     79,236   1.24    Profit $529,092 $8.28   

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount Revenue from special order = 4780 * 12         57,360.00 Less Costs: Variable cost of goods sold= 4780 * 6.23         29,779.40 Variable Selling and Administrative Costs = 4780 * 1.43            6,835.40 Additional material costs = 4780 * .75            3,585.00 Rental of special equipment            3,500.00 Total Variable costs         43,699.80 Profit on the special order         13,660.20 6) Revenue from 950 Units = 950*19         18,050.00 Variable cost of goods sold = 950 * 6.23            5,918.50 Variable selling and admin exp = 950*1.43            1,358.50 Total Variable costs            7,277.00 loss in sales will cause firm profits to fall by 18050 - 7277         10,773.00

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