At the end of the year, a company offered to buy 4,690 units of a product from X

Question

At the end of the year, a company offered to buy 4,690 units of a product from X Company for a special price of $12.00 each instead of the company's regular price of $18.00 each. The following information relates to the 68,400 units of the product that X Company made and sold to its regular customers during the year: Cost of goods sold Period costs Total Per-Unit $8.22 2.22 Total $562,248 151,848 $714,096 $10.44 Fixed cost of goods sold for the year were $146,376, and fixed period costs were $71,820. variable period costs include selling commissions equal to 4% of revenue. 5. Profit on the special order is Submit Answer Tries 0/5 6. Assume the following two changes for the special order: 1) variable cost of goods sold will increase by $0.73 per unit, and 2) theell be no selling commissions. What will be the effect of these two changes on the special order profit? Submit Answer Tries 0/5

Explanation / Answer

Effect of these two changes on the special order profit wil be decease of $47 or -47(22278-22231)

Note: $46.90 has been rounded off to $47

variable cost of goods sold per unit =(562248-146376)/68400= 6.08 Variable Period costs =(151848-71820)/68400= 1.17 Variable commissions = 18*4%= 0.72 1 Incremental revenue 56280.00 =4690*12 Less:Variable costs 34002.50 =4690*(6.08+1.17) Profit on the special order 22277.50 or22278 2 Incremental revenue 56280 =4690*12 Less:Variable costs 34049 =4200*(5.6+1.28+0.72-0.36) Profit on the special order 22231

Effect of these two changes on the special order profit wil be decease of $47 or -47(22278-22231)

Note: $46.90 has been rounded off to $47

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