The Young Company has gathered the following information for a unit of its most

Question

The Young Company has gathered the following information for a unit of its most popular product:

The above cost information is based on 10,400 units. A distributor has offered to buy 2,800 units at a price of $40 per unit. The distributor claims this special order would not disturb regular sales at $57. Special packaging and other selling expenses would be an additional $0.40 per unit for the special order. How many units of regular sales could be lost before this contract is not profitable?

0 units.

1,060 units.

1,400 units.

2,800 units.

Direct materials $ 16 Direct labor 7 Overhead (40% variable) 15 Cost to manufacture 38 Desired markup (50%) 19 Target selling price $ 57

Explanation / Answer

1,060 units. Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up   Statementshowing Computations Paticulars Amount Revenue from specialorder = 2800*40               112,000.00 Less Costs: Direct materials = 16*2800                 44,800.00 Direct Labour = 7*2800                 19,600.00 Variable overhead = 2800*15*40%                 16,800.00 Special packaging and other selling expenses = 2800*.40                   1,120.00 Total costs                 82,320.00 Income from special order = 112000 - 82,320                 29,680.00 Profit per unit = 57- 16-7-6                         28.00 No of units that could be lost = 29680/28                   1,060.00

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