At the end of the year, a company offered to buy 4,000 units of a product from C

Question

At the end of the year, a company offered to buy 4,000 units of a product from Company for a special price of $11.00 each instead of the company's regular price of $19.00 each. The following information relates to the 64,600 units of the product that X Company made and sold to its regular customers during the year: Per-Unit Cost of goods sold Period costs Total Total $543,286 163,438 $706,724 2.53 $10.94 Fixed cost or goods sold for the year were $140,182, and fixed period costs were $96,900. Variable period costs include selling commissions equal to 2% of revenue 5. Profit on the special order is $14,920 You are correct. Previous Tries r receipt no. is 152-7527 6. Assume the following two changes for the special order: 1) variable cost of goods sold will decrease by $0.73 per unit, and 2) there will be no selling commissions. What will be the effect of these two changes on the special order profit? 3800 Submit Answer Tries 3/5 Previous Tries

Explanation / Answer

Special Order a. Prepare an incremental analysis for the special order. Sales (64,600 units) = $ 1227400 Cost of goods sold = 543286 - 140182 = 403,104 / 64600 = $6.24 variable cost per unit Operating expenses =163438 - 96900 = 66538 / 64600 = $1.03 variable cost per unit Revenues = 4,000 x 11 = 44,000 Cost of Goods Sold = 4,000 x (6.24) = $ 24,960 Operating Expenses = 4,000 x (1.03) = $ 4120 Net income = $ 14920 Revenues = 4,000 x 11 = 44,000 Cost of Goods Sold = 4,000 x (6.24-0.73) = $ 22,040 Operating Expenses = 4,000 x (1.03-0.38) = $ 2600 ( 19 * 2% = 0.38) Net income = $ 19360 Difference in profit = 19360 - 14920 = 4440

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